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Discussion: (16 comments)

  1. Impatient should put the money into a Roth IRA and only pay taxes once, on the income earned . . .

    1. Sorry, I meant Patient!

  2. Max Planck

    “Right now the tax code penalizes savings and investment as opposed to consumption, though that is somewhat offset by the capital gains preference”

    And also by preferential tax treatment on dividends, Jim. To my mind, savings is being compensated more than consumption, even at these low rates, as people chase yield to get something on their investments. (Something I am a master of)

    If taxes were raised on dividends and cap gains, someone might reason it may pay to live it up a bit instead of hoarding the cash.

    As it is, I was pleased by POTUS’s modest increase, to just 20% for both, which is prudent and wise at this stage.

    1. Roger Ramjet

      Dear Mr. Krugman,

      Yes, we all know it’s you… The hapless, dunderheaded “economist”, vicariously projecting through your lame alias, the same irreconcilable positions you espouse to your slope-headed readers who frequent your day-gig.

      Sorry. Imperial evidence is what it is.

      As painful as it might be, I suggest Peter Ferrara’s work on Obamanomics vs. Reaganomics as a starting point. Unless, of course, you want to argue here that Keynes is the bomb.

      Oh… I have to ask: Does the New York Times provide you with a Lincoln Town Car limo?

      1. Max Planck

        “Sorry. Imperial evidence is what it is.”

        Yes, it certainly is, isn’t it?

        Thank you for comparing me to a Nobel Laureate. My mother thanks you.

  3. Max Planck

    AEI “Fellow” and “Economist” Glenn Hubbard:

    http://www.youtube.com/watch?v=CaXNqGgIc-g&feature=youtu.be

  4. Todd Mason

    Dallas Fed chief Richard Fisher on capital:

    “[The economy] is already flush with $1.6 trillion in excess private bank reserves owned by the banking sector and held by the 12 Federal Reserve Banks. Trillions more are sitting on the sidelines in corporate coffers. On top of all that, a significant amount of underemployed cash—or fuel for investment—is burning a hole in the pockets of money market funds and other nondepository financial operators. This begs the question: Why would the Fed provision to shovel billions in additional liquidity into the economy’s boiler when so much is presently lying fallow?”

    It also begs the question: How is preferential tax treatment for capital helpful when no one will spend it? Alternatively: Is it possible that, on occasion, cutting labor some slack — more money to spend — is the right answer? Just asking.

    1. Max Planck

      +1

    2. The labor share of national income is in secular decline.

      1. Thomas Sullivan

        The government share of nation income is skyrocketing. Un-counted is the cost of regulation, both compliance costs and the lost opportunity cost. Put them together and government is burning up well over half our national income.

    3. spotteddog

      “Is it possible that, on occasion, cutting labor some slack — more money to spend — is the right answer? Just asking.”

      Capital is what pays for the labor. No capital, no labor. Treat capital poorly and you will get less labor. Unless you can convince people to work for free.

      1. Treat capital poorly and you will get less labor.

        Huh, corporate profits are at record levels relative to GDP.

        1. spotteddog

          What’s your point?

        2. Thomas Sullivan

          Government’s share of the economy (spending + regulation costs) dwarfs corporate profits, about 5.3 to 1. That’s $9 trillion vs $1.7 trillion. Government’s share of the economy is growing too. Government is the black hole consuming our economy.

  5. James Pethokoukis counters Michael Kinsley’s argument on taxation with: “We should want the tax code to be as neutral as possible. Right now, the tax code penalizes savings and investment as opposed to consumption, though that is somewhat offset by the capital gains preference.” A couple of points come to mind. First, is that the financial assets and land assets given preferential treatment under our tax laws are not actually forms of real capital (i.e., capital goods). Gains on financial assets and land are gains largely experienced outside of wealth production. Our economy would benefit significantly if income flows generated by goods production or providing services were lightly taxed. A simplified but progressive income tax could exempt earned income (up to say, the national median), then impose rising rates of taxation on higher ranges of income with no exemptions or deductions permitted. In addition to lowering the tax burden on earned income, some modest levels of interest, dividend and gains on asset sales would also be lightly taxed for most taxpayers. Want to stimulate the economy, stimulate employment of people by giving businesses a tax credit for every person employed full-time in the United States. At least Kinsley understands that an even more basic problem with how our government raises its revenue is that land rents are taxed lightest of all, whereas (as Smith, Mill, George and the classical political economists knew) land rent should be treated as public revenue so that taxes on earned incomes and private produced assets could be greatly reduced or eliminated.

    1. Max Planck

      ” Gains on financial assets and land are gains largely experienced outside of wealth production”

      Someone gets it.

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