I Can Afford Higher Taxes. But They’ll Make Me Work Less.

N. Gregory Mankiw in The New York Times:

AN important issue dividing the political parties is whether to raise taxes on those earning more than $250,000 a year. Democrats say these taxpayers can afford to chip in a bit more. Republicans say raising taxes on those who already face the highest marginal tax rates will hurt the economy.

So I thought it might be useful to do a case study on one of these high-income taxpayers. Fortunately, I have one handy: me.

As a professor at Harvard and the author of some popular textbooks, I am comfortably in the income range that would be hit by this tax increase. I have been thinking — narcissistically, to be sure — about how higher taxes would affect me. Maybe these thoughts can shed some light on some of the broader policy issues

Read the full article here. Discuss below.

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    Note that Berkeley Economics Professor Brad DeLong counters Mankiw (here). In part he writes:

    "The sooner taxes are raised in order to pay for Medicare Part D, the expanded U.S. military, other pieces of Medicare and Medicaid spending growth, and to offset the revenue lost over the past decade of the Bush temporary tax cuts, the lower the taxes on Greg's saving for his children's inheritance will be. That Barack Obama is taking some steps to restore fiscal sanity should diminish his view of the risk-adjusted taxes his long-run savings will pay, and make him more willing to write for the New York Times--not less.

    "But there is more. The two biggest long-run policies that Barack Obama has set in motion over the past two years have been (a) the entrenchment of future reductions in Medicare spending growth designed by the Independent Payment Authorization Board so that they can only be overturned by affirmative congressional supermajority votes to prevent them, and (b) the enactment of a growing and eventually very large tax on high-cost health-insurance plans. Now these policy changes may not survive--the Republicans are pledged, to a sophont, to repeal both of them. But if they do they greatly reduce the amount by which income and other taxes must rise over the next generation. And so they make the expected taxes on Greg's saving-for-his-children's-inheritance significantly lower."

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      Of course he totally ignores the risk that his savings will be entirely wiped out by a need for medical care or long term care, leaving his kids nothing. Maybe he plans to live healthy for thirty more years and then die quickly and conveniently.

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        I like his "imagine no taxes" as his baseline. Think how great our funding for education would be if we just eliminated all taxes?

        (rolls eyes)

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    I think that you can go after his more basic calculations as obviously flawed. First he assumes that corporations pay 35% in taxes. While that is the statutory rate before deductions, most big US companies pay about 20+% because of deductions;many much less. Second, he assumes that Congress will leave the inheritance tax at the rate that the Republicans established in their attempt to fool the public. None of the proposals being discussed are that high. It also assumes that his wealth is already so high that he even pays those rates. If that part is true then his initial claim that he was just trying to let his kids get an education and buy a home is not true.

    Lastly, he implies that he only works for money. Almost no one at his level does that. People work for power, prestige, etc. long after they have enough $ to live the good life.

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