The moral—and economic—case for progressive taxation

JDN 2456935 PDT 09:44. Broadly speaking, there are three ways a tax system can be arranged: It can be flat, in which every person pays the same tax rate; it can be regressive, in which people with higher incomes pay lower rates; or it can be progressive, in which case people with higher incomes pay … Continue reading The moral—and economic—case for progressive taxation

Tax plan possibilities

Mar 26, JDN 2457839 Recently President Trump (that phrase may never quite feel right) began presenting his new tax plan. To be honest, it’s not as ridiculous as I had imagined it might be. I mean, it’s still not very good, but it’s probably better than Reagan’s tax plan his last year in office, and … Continue reading Tax plan possibilities

Whose tax plan makes the most sense?

JDN 2457496 The election for the President of the United States has now come down to four candidates; the most likely winner is Hillary Clinton, but despite claims to the contrary Bernie Sanders could still win the Democratic nomination. On the Republican side Donald Trump holds a small lead over Ted Cruz, and then there’s … Continue reading Whose tax plan makes the most sense?

Something is wrong with the corporate income tax

JDN 2457369 The US corporate income tax is clearly not working. While at one time the corporate income tax took in almost as much revenue as the personal income tax, those days are long gone. In 1934 the personal income tax took in $420 million and the corporate income tax took in $364 million, (adjusted … Continue reading Something is wrong with the corporate income tax

Tax incidence revisited, part 3: Taxation and the value of money

JDN 2457352 Our journey through the world of taxes continues. I’ve already talked about how taxes have upsides and downsides, as well as how taxes directly affect prices and “before-tax” prices are almost meaningless. Now it’s time to get into something that even a lot of economists don’t quite seem to grasp, yet which turns … Continue reading Tax incidence revisited, part 3: Taxation and the value of money

Tax incidence revisited, part 2: How taxes affect prices

JDN 2457341 One of the most important aspects of taxation is also one of the most counter-intuitive and (relatedly) least-understood: Taxes are not externally applied to pre-existing exchanges of money. Taxes endogenously interact with the system of prices, changing what the prices will be and then taking a portion of the money exchanged. The price … Continue reading Tax incidence revisited, part 2: How taxes affect prices

How about we listen to the Nobel Laureate when we set our taxes?

JDN 2457321 EDT 11:20 I know I’m going out on a limb here, but I think it would generally be a good thing if we based our tax system on the advice of Nobel Laureate economists. Joseph Stiglitz wrote a tax policy paper for the Roosevelt Institution last year that describes in detail how our … Continue reading How about we listen to the Nobel Laureate when we set our taxes?

Why the Republican candidates like flat income tax—and we really, really don’t

JDN 2456160 EDT 13:55. The Republican Party is scrambling to find viable Presidential candidates for next year’s election. The Democrats only have two major contenders: Hillary Clinton looks like the front-runner (and will obviously have the most funding), but Bernie Sanders is doing surprisingly well, and is particularly refreshing because he is running purely on … Continue reading Why the Republican candidates like flat income tax—and we really, really don’t

What you need to know about tax incidence

JDN 2457152 EDT 14:54. I said in my previous post that I consider tax incidence to be one of the top ten things you should know about economics. If I actually try to make a top ten list, I think it goes something like this: Supply and demand Monopoly and oligopoly Externalities Tax incidence Utility, … Continue reading What you need to know about tax incidence

No, capital taxes should not be zero

JDN 2456998 PST 11:38. It’s an astonishingly common notion among neoclassical economists that we should never tax capital gains, and all taxes should fall upon labor income. Here Scott Sumner writing for The Economist has the audacity to declare this a ‘basic principle of economics’. Many of the arguments are based on rather esoteric theorems … Continue reading No, capital taxes should not be zero