Do you not pay tax on company benefits (maybe not the office, but the company car, the gym membership, etc.) in the US?
Ok now you correctly get that I am oversimplifying. Perhaps it would be more clear in that what I am referring to is ‘trickle down as the subset of supply side economic theory that was espoused by the Republican party over the last 35 years as an excuse to continually cut tax rates for the wealthy, as a thin veneer to sell to the middle and working classes using near religious language’. But as you note there is more to the supply side theory.
If you want to put the bailout as supply side? Yeah there is some merit there. But the religious mantra that ‘tax cuts always pay for themselves (for the rich)’ is, well, disastrously wrong headed, and promotes inequality. But important to the whole thing is that it is not a magic bullet, and not something to dogmatically pursue at all times.
Important bit. And while boosting GM was probably superior to directly injecting the cash to the working class, thats a far sight more limited, targeted, and focused of reason than always pursuing tax breaks for the wealthy under the dubious quality of ‘creating growth/ jobs’.
True, but in the long run our push towards serfdom under a landed gentry that is current Republican economic policy I’d say will be equally disastrous if not curbed. Perhaps not as dramatic or immediate, but just think through the timeline to when my kids are grown, or have kids of their own. 20, 30, 40 years down the line with the increases at the top, the stagnating/ decline of the middle, increased automation pushing greater percentages to the margins, the explosion of healthcare and education costs making it so that only the wealthy have a chance? If we don’t start bending the curve now, what chance do they have of anything approaching the opportunities my parents had? Student loans are unsustainable now, the system will collapse completely within the 15 years before my son goes if we don’t change trajectory. Same healthcare.
People will be servants in all but name to meet basic necessities while the 1% live like kings. Then we will relearn lessons that the monarchs of the 18th century did. Ask the Bourbons how that worked.
[quote=“MikeJ, post:60, topic:129073, full:true”]Doesn’t an income tax discourage work? I thought that was a pretty basic idea.
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No, it discourages obscene salaries. Which is not the same. For an income tax to be a salary cap you need to go pretty high.
How could you even implement a progressive consumption tax is beyond me, though. And it would (by your logic) discourage buying stuff, which would be pretty bad for creating jobs, one would think.
A progressive income tax with a very high top level discourages obscene salaries. A flatter income tax just discourages salaries. The chart up thread shows top marginal tax rate hitting 94%, which I think qualifies as “pretty high”.
If 94% discourages obscene salaries, would you agree that a say 25% tax in a middle band has at least some discouraging effect?
[quote]One progressive consumption tax is the personal expenditure tax, sometimes called a “consumed income” tax. This tax starts with a framework similar to the individual income tax, but with a crucial modification that strips out the income tax’s saving penalty. Households would report their income on annual tax returns, but would then claim a full deduction for all saving and add back in any dissaving. What’s left would be the household’s before-tax consumption for the year. That consumption amount would be taxed at graduated rates, with higher tax brackets for households with higher consumption. Exemptions and refundable tax credits would be provided to low-consumption households.
Under a personal expenditure tax, households would deduct deposits in savings accounts, the costs of purchasing stocks and other investments, any loans that they made, and any payments (interest or principal) that they made on their debts. Households would pay tax on withdrawals from savings accounts, the full proceeds from selling stocks and other investments, any payments (interest or principal) received from loans that they made, and the full amount of any borrowing that they did. Seidman (1997) provides a thorough analysis of the personal expenditure tax.
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It seems like the problem here would be people finding ways to hide ‘dissaving’, like people hide income.
Well, depending on how it was structured, it would discourage excessive consumption.
I’m not sold on this idea by a long shot. I just don’t think I am the only person in the world who thinks that a tax on X discourages X.
I have no clue. I was just gesturing vaguely at the idea that they would find ways to avoid taxes if they could. I’ve heard the “company car” thing before, but don’t know if that’s what actually happened.
I’d have to dig into the details, but I believe in many cases these things are not taxed. Now it may be that such benefits can accrue a tax, but companies are good at structuring things in such a way to find loopholes to avoid them.
And I totally agree that the shallow, dogmatic approach from most of the GOP is totally nonsensical.
My only desire is to avoid the equally dogmatic view that supply side stimulus can never work.
The biggest problem that we have with public policy in things like this, is that most votes on both sides don’t want to think about the complexities involved… And the major parties don’t want to abandon the simple black and white view that they have bad their messaging on.
But that’s also why I used the term trickle down, or at least thought I did and should have, as it is usually only used to refer to a specific subset of supply side theory, and one that has been used almost exclusively as the justification for top end tax cuts. Ideologically very few people would connect the stimulus to supply side theory to ‘trickle down’.
What merit supply side has is very little in common with trickle down, as trickle down is simply the rick pissing on our legs telling us its raining.
Stimulative effects in supply may have merit sometimes, but it would be very hard to argue that is the cycle point we are currently at.
TBF, supply side has basically never worked, and basically won’t outside of failed-state conditions according to our current understanding of economics.
Unless by “worked” you mean “funneled wealth toward the rentier class.”
Yes, that’s fair, although they are often used interchangeably and I wanted to separate the notion of supply side economic forces from the dogmatic “cutting Rich people’s taxes makes jobs”.
Bruce Bartlett has an interesting paper on the history of supply side economic theory (and also asserts the Republican application of it under Bush II is a caricature of how it’s ‘supposed’ to work.)
The Rise and Fall of Supply-Side Economics:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2840495
That’s a great article, thanks for posting! I particularly enjoyed reading the historical viewpoint. I kinda knew the general arc of the policy decisions that he’s discussing, but there’s a lot of very interesting detail that was new to me, especially back in the 1920s to 1940s.
In the conclusion, Bartlett writes this, which I think nicely sums up my position on the whole “supply-side economics in politics” discussion:
As that article does a good job of explaining, the core principles of supply-side economics are already accepted by pretty much everyone these days. No one in the mainstream is suggesting a rollback to super-high marginal rates and other such policies that really did restrict the private sector, but rather simplification and moderate increases (largely through removal of loopholes and bringing super-low rates like capital gains back into line). When we hear about further tax cuts to spur job creation and other “supply-side” theories these days, it’s just a thin veil for upward income redistribution, not the actual supply-side theory that made improvements to the overall economy.
Infrastructure projects would be a big one.
It’s time to put the old GOP idea of giving money to corporations and the wealthy as a way to stimulate the economy out of its misery. Since the Reagan/Bush era we’ve seen over and over again that all this does is encourage corporations to take that money and invest it overseas in plants and administration in places with no corporate taxes and/or cheap labor. Meanwhile the wealthy take their money and put it in offshore accounts and investments, and what little they spend on luxury items does nothing to benefit the American economy overall. The idea that somehow corporations and the wealthy will be the ones to save the American economy is ridiculous, especially since they’re the ones who have been pillaging it for decades now.
What America needs is “Centernomics”. Tax reform that puts money directly into the hands of the Middle Class (and yes, at the expense of corporations and the wealthy). Throughout history we’ve seen that when the Middle Class has money to burn, the economy explodes with growth, and growth is the ONLY thing that will increase the American tax base, something that desperately needs to happen in the next decade or so. When Middle America is spending money, everyone is happy. Corporations make more money, wealthy people make more money, and even lower income people make more money and have a greater opportunity to climb the ladder and become Middle Class themselves, perpetuating the growth cycle.
Of course, none of this will happen because Republicans are in charge, Hopefully they will put forth legislation that is so obviously built to cater to the wealthy and take from the Middle Class that it will fail as spectacularly as their Healthcare reform did, and clear a path for Democrats in 2018 and 2020. Meanwhile, the Democrats should be pushing with all they have to get the message out to the American people that GOP economics benefit only the super rich, and that Dems are the party of the Middle Class, looking to put money directly back into the pockets of everyday people.
However, the Democrats, wary of “starting a class war” and unfamiliar with how to convince anyone of their ideals, will instead build their 2018 platform around a really strong message like, I dunno, “Democrats: because blue is a nice color, right?”
Again, I point to the auto industry bailout of exactly this, which was pushed by Democrats, and which worked.
Like all government spending, it just needs to be thoughtfully targeted.
Worked based on what measure… the fact GM and Chrysler are still around and the Fed made money on the deal…sure. Did we actually need it… maybe not. Ford, Toyota, Honda, etc could have picked up that market share. I don’t think nationalizing two auto makers is a way to say see giving money to corporations work. Then again, you haven’t really defined what you mean by “worked.”
Well therein lies the trouble with most economic discussions… We rarely if ever get the opportunity to see what awaited us down the road not traveled. We don’t KNOW what would have happened if the US Auto industry had collapsed, we can merely hypothesize.
I believe that propping up those companies likely prevented a massive loss of jobs throughout the industry, which would have resulted in a worsening of the already terrible economy at the time.
The auto industry and banking bailouts are different. Those are cases where a stimulus was specifically limited and targeted to address a need, and both times the money came with strict stipulations on it’s use and eventual repayment or forgiveness.
The general GOP strategy of just handing corporations and wealthy people generous tax breaks is vastly different. It is not targeted, not based on any soft of need, and there is no stipulation that the money be reinvested in a company or indeed that the money be spent at all. It’s economic stimulus by wishful thinking, and it has gotten us nowhere.
If we take that money back (by raising taxes and closing loopholes) and then give a significant portion of it to the Middle Class (by cutting taxes and granting credits), they WILL reinvest it in the economy by spending it. It has to come in the form of tax reform though, not a stimulus. If you give every Middle Class family a check for $1040, chances are many will spend it, but many others will put it in savings or their kid’s college fund or whatever and thus not benefit the immediate economy. If you give every Middle Class family $20 per week more in their paycheck by means of a tax break, 90+% of them are going to simply spend it, providing a huge economic boost. THIS should be the plan for tax reform in this country, not watching all the money we give away to corporations and the wealthy head for offshore investments and accounts and ridiculous C-level executive compensation packages.
The auto industry would not have collapsed. There were several that were in a lot better shape than GM and Chrysler. Chrysler had some under the belly stuff, but I never saw evidence that doing what we did was necessary to keep Ford or that the American owned companies were necessary to keep the auto industry healthy when several of the others have plants here. Again, it’s about value and how you define… worked.
If we took the same amount of money put it somewhere else, we wouldn’t have GM or Chrysler perhaps but could it have bolstered elsewhere… maybe.
Bailing out the auto industry doesn’t hugely qualifies as a trickle down success story. The fact those corporations are still there is not the goal of the trickle down theory. The factor to the economy is.