Chris pointed out an article in the Times (http://www.nytimes.com/2010/10/10/business/economy/10view.html) in which a Harvard professor goes through a specious analysis to demonstrate why he would have a disincentive to accept extra writing jobs like this one for the NYT if the Bush tax cuts for the wealthy aren't renewed. If he isn't capable of a better job of analysis than he shows here, turning him off is one of the strongest arguments I can think of for letting the cuts expire.
He starts out by saying that he really doesn't want any more money for himself, but he might take on extra income assignments to have more to leave his kids. He can't be all bad, right? His analysis then compares how much an extra $1000 income could produce for his estate after 10 years with and without the tax cut. But so far as I can tell, he also adds in all other existing taxes for the case where the tax cuts expire and no other taxes for the case where the tax cuts are extended. After that he then assumes an estate tax at the maximum marginal rate in the first case and no estate tax in the second.. To have that maximum rate apply the rest of his estate has to be in the multimillions so the whole exercise is pretty meaningless.
He does refer to some other studies which conclude that an increase in the tax rate at the top of the scale does not produce as big a proportional increase as the same increase in rate at the low or middle of the scale. I looked up that reference and I don't know how good the study was, but he quoted their conclusion correctly. However, they also added the conjecture that this probably happened mostly because at the low and middle ends, the poor schnooks are getting their money by working for it and can't do anything when rates go up. At the top end, most of the income comes from capital assets and the owners can find ways around the increased rates. In other words, they don't work any less, they just work harder at finding ways to avoid the tax.
My conclusions? Soak the rich and increase the estate tax.
Chris' "Liberal Curmudgeon" blogger at http://budiansky.blogspot.com/ addressed our founding fathers' opinion of inherited wealth in a blog entry for Thursday Oct. 14. And they did not find it compatible with democracy. Funny, I don't remember the teabaggers or their candidates embracing this particular sentiment, even though it is over 200 years old. In fact both parties are falling all over themselves to find self-financing candidates (i.e. billionaires) to run for office. I'm sure they will be delighted to soak the rich - not.
ReplyDeleteLinda