Fighting words from Mr. Sumner. As per he and my agreement I won't legislate an argument with him at his site but I certainly will take issue with it. The main part of Jeb's plan is that it cuts taxes for the rich. Scott likes this as a supply sider.
Liberals like me see cutting taxes on the rich as often pejorative to the extent that it reduces revenue-which will lead to new calls to cut spending.
However, despite his lauding Jeb's tax plan and sharply criticizing Hillary's, he does take some of the edge off after:
"Don’t assume from this post that I lean toward the GOP. On the most important issues facing the country I probably lean slightly toward the Dems, although my actual views are nothing like either party."
Liberals like me see cutting taxes on the rich as often pejorative to the extent that it reduces revenue-which will lead to new calls to cut spending.
However, despite his lauding Jeb's tax plan and sharply criticizing Hillary's, he does take some of the edge off after:
"Don’t assume from this post that I lean toward the GOP. On the most important issues facing the country I probably lean slightly toward the Dems, although my actual views are nothing like either party."
http://www.themoneyillusion.com/?p=30541#comments
Be that as it may let's look at what he says about the two tax plans:
"Jeb Bush recently presented some really sensible ideas on tax reform. For years I’ve been complaining that we tax equity financed investments at much higher rates than debt financed investments. Not only does that make no sense on either equity or efficiency grounds, it also makes our financial system more unstable. One reason the 2008 financial crisis was worse than 2001 is that the tech bubble was more about equity and the housing bubble was more about debt. (Of course NGDP was the main reason it was worse.)"
"Bush proposes to cut corporate tax rates to 20%, switch to the territorial system used in other countries, allow the expensing of capital investments, and make up (at least some of) the revenue by no longer allowing the expensing of interest costs. Finally, debt and equity would be on a level playing field. And there’s lots of other great stuff—eliminate the marriage penalty, no more AMT, no death tax, etc., etc. But rather than a top rate of 28%, I’d rather see 70%, combined with unlimited 401k privileges. Still, a great proposal."
"And now to go from the sublime to the ridiculous. Hillary Clinton is proposing a capital gains reform that is so foolish that even the very liberal Massachusetts legislature eventually abandoned the idea. There would be a sliding scale of capital gains tax rates. Here’s Alan Reynolds:"
"Hillary Clinton’s most memorable economic proposal, debuted this summer, is her plan to impose a punishing 43.4% top tax rate on capital gains that are cashed in within a two-year holding period. The rate would drift down to 23.8%, but only for investors that sat on investments for six years."
"This is known as a “tapered” capital-gains tax, and it isn’t new. Mrs. Clinton is borrowing a page from Franklin D. Roosevelt, who trotted out this policy during the severe 1937-38 economic downturn, dubbed the Roosevelt Recession. She’d be wise to consider how it played out."
Be that as it may let's look at what he says about the two tax plans:
"Jeb Bush recently presented some really sensible ideas on tax reform. For years I’ve been complaining that we tax equity financed investments at much higher rates than debt financed investments. Not only does that make no sense on either equity or efficiency grounds, it also makes our financial system more unstable. One reason the 2008 financial crisis was worse than 2001 is that the tech bubble was more about equity and the housing bubble was more about debt. (Of course NGDP was the main reason it was worse.)"
"Bush proposes to cut corporate tax rates to 20%, switch to the territorial system used in other countries, allow the expensing of capital investments, and make up (at least some of) the revenue by no longer allowing the expensing of interest costs. Finally, debt and equity would be on a level playing field. And there’s lots of other great stuff—eliminate the marriage penalty, no more AMT, no death tax, etc., etc. But rather than a top rate of 28%, I’d rather see 70%, combined with unlimited 401k privileges. Still, a great proposal."
"And now to go from the sublime to the ridiculous. Hillary Clinton is proposing a capital gains reform that is so foolish that even the very liberal Massachusetts legislature eventually abandoned the idea. There would be a sliding scale of capital gains tax rates. Here’s Alan Reynolds:"
"Hillary Clinton’s most memorable economic proposal, debuted this summer, is her plan to impose a punishing 43.4% top tax rate on capital gains that are cashed in within a two-year holding period. The rate would drift down to 23.8%, but only for investors that sat on investments for six years."
"This is known as a “tapered” capital-gains tax, and it isn’t new. Mrs. Clinton is borrowing a page from Franklin D. Roosevelt, who trotted out this policy during the severe 1937-38 economic downturn, dubbed the Roosevelt Recession. She’d be wise to consider how it played out."
"It’s scary that Clinton’s advisers are so brain dead on economics that they think there is some public policy purpose that would justify this nonsense."
I'm not sure why a 43.4% top rate on capital gains is 'punishing'-I'm guessing the 43.4% includes the ACA tax on top earners plus the 39.6% rate Hillary is proposing.
What makes it punishing? We had a 39.6% rate in the 90s and the it was a very good decade for Wall St. Reynolds is being alarmist by referencing 1938 as we had the same rate she;s asking for in the 90s and investors did very well.
As for Jeb's plan-the issue of equity vs. debt is Sumner's opinion. Not everyone thinks this makes a big difference either way. Just like I think Sumner also exaggerates the importance of the alleged 'marriage penalty'-but these are at best issues of 'horizontal equity'-and I don't see how this is going to get us to 4% growth as Jeb promises.
Most of Jeb's proposal is about cutting taxes radically on the rich. He wants to do away with the inheritance tax and cutting the income tax for the rich from 39.6%-as it was under both President Obama and President Clinton-to 28%-a rate lower than it was even under his brother-who also never went as far as wholly eliminating the inheritance tax.
I'm not sure why a 43.4% top rate on capital gains is 'punishing'-I'm guessing the 43.4% includes the ACA tax on top earners plus the 39.6% rate Hillary is proposing.
What makes it punishing? We had a 39.6% rate in the 90s and the it was a very good decade for Wall St. Reynolds is being alarmist by referencing 1938 as we had the same rate she;s asking for in the 90s and investors did very well.
As for Jeb's plan-the issue of equity vs. debt is Sumner's opinion. Not everyone thinks this makes a big difference either way. Just like I think Sumner also exaggerates the importance of the alleged 'marriage penalty'-but these are at best issues of 'horizontal equity'-and I don't see how this is going to get us to 4% growth as Jeb promises.
Most of Jeb's proposal is about cutting taxes radically on the rich. He wants to do away with the inheritance tax and cutting the income tax for the rich from 39.6%-as it was under both President Obama and President Clinton-to 28%-a rate lower than it was even under his brother-who also never went as far as wholly eliminating the inheritance tax.
His 20% corporate tax rate just completes a much more regressive tax structure than his brother's.
P.S. Maybe what's objectionable in Hillary's plan according to Sumner-Reynolds it encourages investors to wait to cash out making it less liquid? Again, don't see how this is a big issue that can lead us to the kind of untapped growth Jeb is talking about.
P.S. Maybe what's objectionable in Hillary's plan according to Sumner-Reynolds it encourages investors to wait to cash out making it less liquid? Again, don't see how this is a big issue that can lead us to the kind of untapped growth Jeb is talking about.
P.S.S. Maybe Tom Brown, the Scott Sumner Whisperer can explain what's so brilliant about Jeb's plan or terrible about Hillary's.
My read is simply because Sumner's a supply sider. A SSer believes that an economy's investment is very sensitive to things like changes in tax rates and regulations.
My read is simply because Sumner's a supply sider. A SSer believes that an economy's investment is very sensitive to things like changes in tax rates and regulations.
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