Joblessness: The Kids Are Not Alright

[CaP'N GRuNGe]

not really true. read this.

 

Speaking of disengenious...

 

I saw this a while ago mocked by Yglesias...

 

http://yglesias.thinkprogress.org/archives...d-tax-logic.php

 

Mankiw’s Tortured Tax Logic

The normal way to do cross-country comparisons of tax burdens is to look at taxes as a percent of GDP, or else to maybe look at public spending as a percent of GDP since the volume of spending determines the ultimate level of taxation that will be necessary. Since taxes as a percent of GDP are low in the United States compared to other developed countries, cross-country analysis leads some to believe that higher tax rates would be desirable or viable in the United States. Greg Mankiw doesn’t like that conclusion, because he thinks high tax rates depress growth, so he suggests that we try another way of comparing tax burdens:

 

The most common metric for answering this question is taxes as a percentage of GDP. However, high tax rates tend to depress GDP. Looking at taxes as a percentage of GDP may mislead us into thinking we can increase tax revenue more than we actually can. For some purposes, a better statistic may be taxes per person, which we can compute using this piece of advanced mathematics:

 

Taxes/GDP x GDP/Person = Taxes/Person

 

Here are the results for some of the largest developed nations:

 

— France: .461 x 33,744 = 15,556

— Germany: .406 x 34,219 = 13,893

— UK: .390 x 35,165 = 13,714

— US: .282 x 46,443 = 13,097

— Canada: .334 x 38,290 = 12,789

— Italy: .426 x 29,290 = 12,478

— Spain: .373 x 29,527 = 11,014

— Japan: .274 x 32,817 = 8,992

 

Mankiw concludes that “the bottom line” is that the United States isn’t actually a low-tax country. But while I’m sure Mankiw believes the conclusion that raising taxes isn’t as viable as I (or, say, Paul Krugman) think, I seriously doubt that he believes this mode of analysis is correct. After all, why should the bottom line relate to the United States at all? Does Mankiw really think that Italy has more scope to increase taxes and the size of its public sector than does the United States? Or consider that in Slovakia per capita GDP is just $20,000. By Mankiw’s logic, Slovakia could raise taxes up to 65 percent of GDP and it would still count as a country with a below-average tax burden!

 

Common sense is that if you’re worried about the impact of taxes on growth, then when you’re worried about is the scope of taxation relative to the total amount of economic activity taking place. For Slovakia to try to raise as much revenue as we have in the United States would involve potentially ruinous levels of taxation. Conversely, for the American government to raise as much revenue per person as they have in France would be relatively easy.

 

I think that if you want to reach the conclusion that taxes as a percent of GDP understates the extent of government involvement in the economy, the most promising line of argument is to note that there’s a substantial “shadow” welfare state of tax preference and regulatory mandates out there.

[CaP'N GRuNGe]

This is disingenuous and you know it. Until the Reagan reforms you could deduct so much and there were so many shelters you could always avoid those rates. You could deduct ALL interest (car, credit card, whatever) ALL taxes (sales).

 

Since, IIRC, you're an accountant, I must assume you know better and it was your intention to be a bald faced liar misrepresenting the truth???

 

I'm not a tax accountant. I just liked the table.

 

Yes I know it's only one piece of the puzzle. If someone could show me a more complete picture of the tax burden spread between the classes over the same period of time I would be interested in seeing it. All I know is, those wealthy people must be REALLY smart because for all the moaning and groaning over redistribution, there is an ever increasing widening between the rich and the poor in this country.

 

Must be all those good tax accountants.

[Azazello1313]

Speaking of disengenious...

 

I saw this a while ago mocked by Yglesias...

By Mankiw’s logic, Slovakia could raise taxes up to 65 percent of GDP and it would still count as a country with a below-average tax burden!

 

 

he's not comparing the US with slovakia, he's comparing it with the other "rich" nations. and remember that the point mankiw is getting at with all of this:

 

The most common metric for answering this question is taxes as a percentage of GDP. However, high tax rates tend to depress GDP. Looking at taxes as a percentage of GDP may mislead us into thinking we can increase tax revenue more than we actually can.

 

looking at taxes per person can shed some light on that. also, read this:

 

When I started studying economics the US was much richer than Western Europe and Japan, but was also growing more slowly than other developed countries. They were still in the catch-up growth phase from the ravages of WWII. But since Reagan took office the US has been growing faster than most other big developed economies, and at least as fast in per capita terms. They’ve plateaued at about 25% below US levels, when you adjust for PPP. This is the steady state. The big question is why.

 

Take a look at the data for Germany and Italy. On average they collect .416 of GDP in taxes, as opposed to the .282 ratio in the US. And yet the average amount collected is only slightly higher than US tax revenues.

 

Here’s the $64 dollar question for which I’ve never seen progressives provide a satisfactory answer. Why is per capita GDP in Western Europe so much lower than in the US? Mankiw seems to imply that high tax rates may be one of the reasons. I don’t know if that’s the answer, but if it’s not my hunch is that the factors that would explain the difference are other government policies that the left tends to favor (strong unions, higher minimum wages, more regulation, generous unemployment insurance, etc.) So I think Mankiw is saying that if we adopt the European model, there really isn’t a lot of evidence that we’d end up with any more revenue than we have right now.

 

but really all that is neither here nor there for the discussion that was going on here. someone said americans pay less taxes than other rich countries. the taxes-per-person metric addresses that directly, and shows that the US is more middle-of-the-pack.

[CaP'N GRuNGe]

he's not comparing the US with slovakia, he's comparing it with the other "rich" nations. and remember that the point mankiw is getting at with all of this:

 

 

 

looking at taxes per person can shed some light on that. also, read this:

 

 

 

but really all that is neither here nor there for the discussion that was going on here. someone said americans pay less taxes than other rich countries. the taxes-per-person metric addresses that directly, and shows that the US is more middle-of-the-pack.

 

Taxes per person means nothing. Tax rates per person is what you should be looking at to get a more accurate picture. That was the point.

 

Resorting your little table by rate:

 

— France: .461 x 33,744 = 15,556

— Italy: .426 x 29,290 = 12,478

— Germany: .406 x 34,219 = 13,893

— UK: .390 x 35,165 = 13,714

— Spain: .373 x 29,527 = 11,014

— Canada: .334 x 38,290 = 12,789

— US: .282 x 46,443 = 13,097

— Japan: .274 x 32,817 = 8,992

 

Leaving us 2nd to last in the countries mentioned. Not "middle of the pack" as Mankiw would like you to believe based on dollar figures only.

Edited April 9, 2010 by CaP'N GRuNGe

[Azazello1313]

Taxes per person means nothing. Tax rates per person is what you should be looking at to get a more accurate picture. That was the point.

 

and the counterargument to that point is that there is a bit of an inverse correlation between the two. raising taxes lowers incomes. americans pay as much in taxes, but on average they have higher incomes.

 

Why is per capita GDP in Western Europe so much lower than in the US?

Edited April 9, 2010 by Azazello1313

[WaterMan]

Nice. People under 25 can't find work so no one is going to be paying for the baby boomers' social security.

 

And then we're going to have the student loan bubble burst soon on top of everything else. Oh boy I can't wait for $10 tomatoes.