Top Marginal Tax Rates and Real Economic Growth

[ksen]

http://angrybearblog.com/2016/08/top-marginal-tax-rates-and-real-economic-growth-part-1.html

This post looks at the relationship between the top marginal income tax bracket and growth in real GDP per capita (from NIPA table 7.1) in the subsequent year or years.

Interesting start of a series of posts on this topic over at Angry Bear.

The main conclusion of this part is that there is a significant statistical relationship between higher marginal rates and higher GDP growth especially over the longer term.

 

[dismal]

well, let's put a top marginal tax rate of 1,000,000% on incomes above $10,000,000,000,000 and watch the economy soar!

 

[Elixir]

well, let's put a top marginal tax rate of 1,000,000% on incomes above $10,000,000,000,000 and watch the economy soar!

How about 90.00000000% on annual incomes above $9,000,000.000000, since you seem to so love zeroes?

 

[dismal]

well, let's put a top marginal tax rate of 1,000,000% on incomes above $10,000,000,000,000 and watch the economy soar!

How about 90.00000000% on annual incomes above $9,000,000.000000, since you seem to so love zeroes?

Mine's bigger.

 

[ksen]

well, let's put a top marginal tax rate of 1,000,000% on incomes above $10,000,000,000,000 and watch the economy soar!

I'm surprised it took you nearly an hour to come up with that.

I guess productivity really is cratering.

 

[Elixir]

How about 90.00000000% on annual incomes above $9,000,000.000000, since you seem to so love zeroes?

Mine's bigger.

The non-existent isn't "bigger" than anything... sorry!

 

[ksen]

Guys, can we keep the Trump hand size discussion over in the Elections forum?

tia!

 

[Medicine Man]

http://angrybearblog.com/2016/08/top-marginal-tax-rates-and-real-economic-growth-part-1.html

This post looks at the relationship between the top marginal income tax bracket and growth in real GDP per capita (from NIPA table 7.1) in the subsequent year or years.

The main conclusion of this part is that there is a significant statistical relationship between higher marginal rates and higher GDP growth especially over the longer term.​

I'm a bigger fan o' Precedence.....something that's PROVEN to work!!


http://www.kellysite.net/taxes.html

*
http://www.perkel.com/politics/clinton/accomp.htm​

 

[dismal]

Mine's bigger.

The non-existent isn't "bigger" than anything... sorry!

No actually 1,000,000% is a bigger number than 90%. Hence it's better for the economy.

 

[Elixir]

No actually 1,000,000% is a bigger number than 90%. Hence it's better for the economy.

1,000,000,000,000% of individual annual incomes over ten trillion dollars is, as I said - nothing. I get what you're trying to represent - simply pointing out that it just ain't so.

 

[Medicine Man]

Guys, can we keep the Trump hand size discussion over in the Elections forum?

.....Another issue we'll finally breach.....





.....once Hillary joins the OTHER world-leaders.

http://www.guide2womenleaders.com/Current-Women-Leaders.htm​

 

[dismal]

No actually 1,000,000% is a bigger number than 90%. Hence it's better for the economy.

1,000,000,000,000% of individual annual incomes over ten trillion dollars is, as I said - nothing. I get what you're trying to represent - simply pointing out that it just ain't so.

Now you're thinking. Your 1,000,000,000,000% would be better for the economy than my 1,000,000%

Assuming ksen is right and the top marginal tax rate is the thing.

 

[coloradoatheist]

I am curious. At the time when we had these high rates, didn't crack down on companies hiding executive compensation as company purchases instead of income. Are they going to become lenient again so that country club membership isn't taxed?

 

[ksen]

I am curious. At the time when we had these high rates, didn't crack down on companies hiding executive compensation as company purchases instead of income. Are they going to become lenient again so that country club membership isn't taxed?

The author doesn't address that in this part. Maybe in future parts.

In the comments he did mention that it may be the tax avoidance measures by people that caused the majority of the relationship, i.e. if an owner didn't want to pay the 90% top rate he'd instead invest the money he otherwise would have paid himself into the business by upgrading capital equipment, paying his employees more, etc.

 

[dismal]

I am curious. At the time when we had these high rates, didn't crack down on companies hiding executive compensation as company purchases instead of income. Are they going to become lenient again so that country club membership isn't taxed?

I think we can assume they rigorously controlled for any and all other factors that may have been different besides the top marginal tax rate, can't we?

 

[coloradoatheist]

I am curious. At the time when we had these high rates, didn't crack down on companies hiding executive compensation as company purchases instead of income. Are they going to become lenient again so that country club membership isn't taxed?

The author doesn't address that in this part. Maybe in future parts.

In the comments he did mention that it may be the tax avoidance measures by people that caused the majority of the relationship, i.e. if an owner didn't want to pay the 90% top rate he'd instead invest the money he otherwise would have paid himself into the business by upgrading capital equipment, paying his employees more, etc.

Partially yes. That country club membership that the company bought for the CEO avoided taxed. The IRS cut down on companies avoiding taxes that way. What we will see is instead of the high marginal tax, we'll go back to C level corps that tax at a lower level.

 

[Elixir]

...Assuming ksen is right and the top marginal tax rate is the thing.

Your time would be better spend examining that assumption than creating hyperbolic nonsense. What would a top rate of say, 75% on income over $2m/yr do to (or for) the economy?

Last year, as an partner/owner of a fast-growing small business, I paid far more to the fed than I took home. My take-home income after taxes (on my salary plus on corporate profits - all of which went back into the Company) was less than the US median income, even though I showed - and paid taxes on - multiples of that amount in "income". I have employees making more than I do at the end of the day. Makes it pretty tough to grow a small business. Maybe if I put up with that long enough, I'll be able to afford to cheat like the big boys? Not likely. More likely I'll have to sell out to venture capitalists if I ever want to see significant money. Meanwhile, we employ some 20 people...
No reward within the existing system.

 

[dismal]

...Assuming ksen is right and the top marginal tax rate is the thing.

Your time would be better spend examining that assumption than creating hyperbolic nonsense. What would a top rate of say, 75% on income over $2m/yr do to (or for) the economy?

Last year, as an partner/owner of a fast-growing small business, I paid far more to the fed than I took home. My take-home income after taxes (on my salary plus on corporate profits - all of which went back into the Company) was less than the US median income, even though I showed - and paid taxes on - multiples of that amount in "income". I have employees making more than I do at the end of the day. Makes it pretty tough to grow a small business. Maybe if I put up with that long enough, I'll be able to afford to cheat like the big boys? Not likely. More likely I'll have to sell out to venture capitalists if I ever want to see significant money. Meanwhile, we employ some 20 people...
No reward within the existing system.

Not as much as a top marginal tax rate of 1,000,000%, according to the analysis.

I saw no mention of the income at which the top rate kicks in in the analysis provided, so I think my number ought to work as well as any other and be easier to sell politically.

 

[Harry Bosch]

...Assuming ksen is right and the top marginal tax rate is the thing.

Your time would be better spend examining that assumption than creating hyperbolic nonsense. What would a top rate of say, 75% on income over $2m/yr do to (or for) the economy?

Last year, as an partner/owner of a fast-growing small business, I paid far more to the fed than I took home. My take-home income after taxes (on my salary plus on corporate profits - all of which went back into the Company) was less than the US median income, even though I showed - and paid taxes on - multiples of that amount in "income". I have employees making more than I do at the end of the day. Makes it pretty tough to grow a small business. Maybe if I put up with that long enough, I'll be able to afford to cheat like the big boys? Not likely. More likely I'll have to sell out to venture capitalists if I ever want to see significant money. Meanwhile, we employ some 20 people...
No reward within the existing system.

You might need a better CPA!

 

[Loren Pechtel]

http://angrybearblog.com/2016/08/top-marginal-tax-rates-and-real-economic-growth-part-1.html

This post looks at the relationship between the top marginal income tax bracket and growth in real GDP per capita (from NIPA table 7.1) in the subsequent year or years.

Interesting start of a series of posts on this topic over at Angry Bear.

The main conclusion of this part is that there is a significant statistical relationship between higher marginal rates and higher GDP growth especially over the longer term.

I don't think we have enough data to support this.

1) The old high-tax data points are from a time where we don't really know what the tax rate was because of all the loopholes.

2) I can think of multiple occasions where there was an economic shift that clearly wasn't due to the tax rates--and the good times matched up with high tax rates, the bad times were with low tax rates.