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Friday, November 23, 2012

Scott Sumner Keeps Calling Obama a Liar

     Throughout the election I've come to if anything come to see Sumner in something of a better light. I don't see him as necessarily all bad. There was a time when I saw him as nothing but a backdoor Paul Ryan Republican, however I've since come to think the story is at least somewhat more nuanced than that.

    He basically agreed that Obama deserved re-election based on GOP obstructionism. In addition, to the extent that he was part of the groundswell that led us to QE3 I'd say he was on the side of angels. Nevertheless he insists on this narrative that Obama is somehow "lying" by saying that his intention is to raise the top marginal tax rate from 35% to 39.6%. Here he is at it again:

   "It’s hard to go a day without reading some liberal pundit or reporter or politician claiming that President Obama merely wants to raise the top income tax rate back up to 39.6%, where it was during the highly prosperous 1990s. This is false. Under current law the rate is scheduled to rise to 43.4%, and the top capital gains rate (long term) will rise from 15% to 23.8%."

    "Why is this misinformation repeated over and over again? Do the people saying this know they are lying? If it was a conservative doing this I’m quite sure Paul Krugman would accuse him of intentionally lying. I really don’t know what to make of it. It’s depressing that they would almost universally think it’s OK to lie, but it’s also depressing if it’s because newspapers like the New York Times don’t even understand what’s going on."

     "Our incompetent representatives in Washington were not satisfied with creating two parallel tax systems, and then forcing taxpayers to compute their taxes both ways, and pay the larger amount. So now they’ve added a third income tax system, a 3.8% tax rate on income over $125,000/year (oh yes, they lie about that too, calling it a $250,000/year threshold) on top of the 39.6% top rate. In Sweden there is no marriage penalty, as everyone is treated with dignity, like an individual. And the government merely sends you the bill. A tax system of elegant simplicity. Meanwhile the US sinks ever deeper into banana republic-style complexity."

     http://www.themoneyillusion.com/?p=17831

     I couldn't resist-I left him a comment. It won't surprise me if he answers it snarkily if at all, but here's what I said:

    "Is there any such thing as someone who is mistaken about something which is distinguished from someone who knows what they’re saying isn’t true?"

    "Am I lying if I say 2+2=5? It depends if I know that it’s really 4. If I don’t, I’m not lying I’m must wrong."

    "If “someone doesn’t know they’re lying” they aren’t lying. I thin intentionality is basic to the action of lying."

    "I say all this presuming you were right about this. As to the capital gains tax rate, when it goes up under top earners that will be back to the Clinton rate-it was Bush who dropped it to 15%."

    "As to the current rate being 43.4% I notice that you often just say this without explaining how you got it but I think you have sometimes explained it as being due to ACA."

    "It’s neither a lie or even factually wrong to say that the top marginal tax rate is 39.6%. If the ACA is a tax-I guess that’s what Roberts decided though the conservatives actually needed to show it wasn’t a tax to win as it turned out-it’s not an income tax and hits everyone the same amount."

     "When we speak of the marginal rates it’s not wrong not to factor every other tax we pay at any level."

      "If someone who makes $16,000 also pays a tax rate of 12% no one says that’s wrong to say as they also pay a 7% sales tax."

     On my last point, I see that he did reply to someone else that

     "There’s a difference between a wage tax and an income tax. I would never accuse someone of lying because they left out a payroll (i.e. wage) tax. The 3.8% tax I’m referring to is an income tax, not like the social security payroll tax."  

     "Maybe the left really is ignorant of what’s going on."

      At best, then he denigrates anyone who questions him on this as ignorant. But I really do see this argument of his as arbitrary-though it's possible that I've failed to fully explain why it is. My gut tells me it's wrong but admittedly I haven't necessarily come up with what I'm sure is the best reason why.

    I just think that adding the ACA is arbitrary.

    If anything, Jeffrey Yaskin probably makes an argument that's closer to the mark in showing where Sumner's fallacy is:

   "Now, I’m far from an expert in tax law, but I see 3 top brackets here:
   "Wage income: 39.6%"
    "Capital gains income: 23.8%"
    "Non-wage, non-capital gain income: 43.4%"

     "Do you know what fraction of marginal income above the $250K (per family) level falls in each category? I’d assumed that most income was long-term capital gains or wages, but for Mr. Sumner to have a point, there would need to be a significant chunk in that non-wage, non-capital-gain category.
Or we could quit nitpicking and just agree that this is way too complicated, and why won’t voters accept less favorable tax treatment for some of the choices they’ve already made so that we can simplify the whole thing?"

     If you think you bring clarity to this, your input would be much appreciated. It would be great to totally pop this balloon of Sumner's. If he has any argument at all, he's definitely overplaying his hand by insisting that if you don't agree you're lying pure and simple.

     UPDATE: As far as SS and Medicare are concerned, that's something the rich pay much less for as the cap is so low.

5 comments:

  1. Hello .. I have never seen a smart articles that you created. It really helped me to get back my ideas for writing. I will save this post, for I learn more income cash system

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  2. Glad you liked it ich and am very gratified if you feel you learned from it.

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  3. Mike,

    Apologies for not being around much the past couple months. My relative apathy toward the political debate was part of the reason but my focus on school played a larger role.

    Anyways, I don't know all the details on the tax rates but think some combination of the above is correct. The tricky part is that there are so many different taxes, which makes specifying any cumulative rate difficult. My best guess is that both Sumner and the Dems are correct, just using different definitions to describe the same thing (politics at its best).

    There are two critiques I would make to the debate:
    1) I don't think Obama really desires to raise rates on the wealthy, but knows it plays well with his base and independents. I expect current marginal income rates to be extended for all with some concessions on regressive loopholes.
    2) Sumner and Dems remains in the camp that believes cutting the deficit will be positive for the economy and can be offset by monetary policy, if necessary. While I don't expect a deal before Jan 1, I do think a deal will be reached that drops the deficit to ~5% next year. I fear this will not be enough to maintain growth throughout the year and think monetary policy is practically powerless to combat the effects.

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  4. Hey Woj! Great to hear from you again. I hope your mistkane about Obama as I do want to see the tax rates on the rich go up. It looks like the GOP would even do this but they're desperate to save faith-even going as far as offering to end all lower marginal rates for people who make say more than $400,000-so they would pay 35% on all their income.

    This would effetively raise their rates to 41%-but it would give the GOP cover, evidently.

    I do think the rich should pay more. I do agree with you that this is not really the time to worry over cutting the deficit but I support raising taxes on the rich on prinicple and because even our structural deficit was too high-prior to the recession.

    This was caused by Bush's tax cuts and the two unfunded wars.

    While I agree that we should have a deficit right now the CBO shows that raising taxes just on the rich would cost about .3% of GDP-and this would be temporary.

    So I don't want it to be a deal that just cuts "loopholes"

    Do you even understand this theory of the GOP and others that somehow cutting loopholes makes the tax system "flatter, fairer, and more efficient?"

    I get the flat part but I don't see flatter as fairer or why it necessarily if more efficient either for that matter.

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    Replies
    1. Efficient refers to the idea that the government has trouble determining which sectors of the economy funds should flow to in order to maximize output/income. A flat tax on income or sales allows prices and preferences to determine where money gets spent, invested and ultimately earned. The purpose or loopholes, credits, deductions, etc is to subsidize some portion of the economy and encourage more funds be directed in that direction. This often results in misallocation of capital (beyond normal imperfect markets) which is inefficient.

      As for fair, as mentioned above, loopholes and other alterations are a manner by which politicians elect to favor one group of Americans over another through the tax code. There is a strong case to be made that the benefits of these revisions largely accrue to the wealthiest classes. In that sense, the loopholes are both unfair and highly regressive.

      Unfortunately this is one area where I think most Democrats/Liberals have bought into the mainstream story and permitted a hollowing out of the tax code that helps ensure significant income and wealth inequality. While I don't know that economics or I can say which manner is more fair, I do believe a simpler tax system would be more efficient and result in a more equal distribution of wealth (ceteris paribus).

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