But the fair weather fans think the’ve hit the jackpot when crazy Ben argues some end that they support… the problem is… he’s still crazy Ben.

The Laffler curve (”taxes pay for themselves”) is a straw man that wasn’t ever respected in academic circles as a practical conclusion at current tax rates… only a theoretical point that remains true.

Independent Accountant supports the rational conclusion here… Clinton’s budget surplus wasn’t fiscal discipline, but a failure to grow spending enough to keep up with higher taxes applied to on exploding incomes (hello bubble).

From 1992 to 2000, tax receipts jumped a whopping 85% during a period of 55% GDP growth (all nominal values). Are we really shocked that they couldn’t spend it that fast?

The more revealing conclusion arises from looking at the spending pattenrs within the period. From 1992 to 1997, the US economy was in deficit and spending grew 15.8% or a little under 3% annualized.

While the government was in surplus from 1998 through 2001, using 2002 numbers may include unnecessary war values. However spending between 1998 and 2000 grew at an annualized rate of 4%. 1998 to 2001 grew at 4% (annualized) and 1998 to 2001 grew at 5% annualized (likely bad data even though the number is higher).

This is just an example… I’ve run the larger regression (ad hoc) which suggests that the magnitude of the surplus/deficit explains about 15% of the growth in spending. That’s a non-trivial number, particularly compounded over several years.

We also forget that the rich don’t consume proportionately more than the poor. This means that they’re doing something else with their money. More specifically, it’s being saved, giving banks and businesses the ability to borrow capital to purchase capital equipment, inventories, etc.

If you have a mortgage… someone had to save that money… and the rich do save a lot. If your company pays for a machine or a desk or a computer… that’s money borrowed from someone (again a non-trivial amount from the rich).

There are unintended consequences of taxes on the rich… and while tax receipts fall, the economy-wide impacts may not actually be negative.

Obviously, I’ve made my points and will be back (eventually) to defend them (as will no doubt be necessary)

Anyone who has bothered to read “Free Lunch”. Perfectly Legal” or Gotcha Capitalism” knows perfectly well that taxing the rich, AT THIS TIME, is basically a return to a more normal state of affairs.

By the way, the argument that more tax revenues is more occasions for the politicos to spend always carry the implicit assumption that any spending by Washington is bad.

To that argument, my answer is: Bullshit! Of course, there is waste and pork and it irritates me like everyone else. Along with that, we have NOAA, the NIH, the Interstate highway system, (anyone remember the fight around that one?) the CDC and countless other services that the private sector, cannot, by definition fulfill. Plus, some projects like the ones at NASA generates a LOT of derivative technology that the private sector would NOT develop without that public “seed capital”, but is all too happy to use and improve thereafter.

Furthermore, with the looming energy crisis coming, a lot of federal dollars will be needed to adapt current infrastructure (especially the residential sector) to the new reality of the 21th century.

Finally, I refuse to saddle my children with my current expenses. it is morally wrong and economically stupid. After all, they’re the ones who will take care of us when we get admitted into nursing homes, need advanced medical care and all that. I’d like to know that they’re able to do so instead to trying to merely survive.

At least in America, a fair number of today’s rich are working rich, which means their mobility is limited until they decide to at least semi-retire. And if you run it correctly, having your own business is still one of the best tax shields. If you don’t get greedy about it, you can run a lot of expenses through the business and not run afoul of the IRS.

I had a huge argument a few days ago with a reader who got so verbally abusive I had to delete his comments, but he presented himself as a rich person who was very aggrieved about his taxes (I have a sneaking suspicion he was more rich wannabe). I told him if he was so upset he should move to a place with lower taxes. That was when he got vitriolic.

Clinton, of the supposed tax-and-spend Democrat tribe, had budget surpluses. In fact, the Treasury quit issuing 30 year bonds because the funding requirements were down (you still have to roll outstanding debt) because they figured they didn’t need it any more. There was even some debate as to what might happen if there were no more Treasury bonds.

The Australians also run Federal government surpluses, consistently. They have no Federal government bonds. You can have a democracy and not engage in deficit spending.

The top 1% makes 20% of income. We aren’t taxing dividend income these days. Hedge fund and private equity managers have their carried interest, which by any standard is labor income, taxed at a capital gains rate.

We had top Federal rates as high as 70% in the past. The economy actually showed higher growth rates in those days. The idea that redistribution or high taxes on the wealthy is bad for the economy hasn’t been prove empirically. In fact, the reverse seems to be true.