Tuesday, August 20, 2013

Economists and Taxes

This is a comment I posted on the wonderful Naked Capitalism blog in response to an article by an economist on taxes. He was actually making a good point: that economists use language about taxes that builds in an anti-tax prejudice. But he didn't do it in clear English, and he presented his ideas in the abstract way that economists do, without reference to reality. So I wrote:
I had three responses to this article.(1) Why can’t economists learn to write in the English language? (2) Why postulate what people are like? There are polls, and there is sociology. You can actually find out about people’s wants and needs. (3) Why not take a look at history? World War Two and the 1950s show how much damage was done to the economy by high taxes combined with high government expenditures.
(Note: there is a bit of sarcasm here. The American economy roared during WWII and did better in the 1950s than it has done since. Taxes were high, and the government spent a fortune on the war effort and then on post-war housing and education and the interstate highway system and... Economists talk about the dead weight of taxes pulling down the economy. Top income tax rates were over 90% in the 40s and 50s. They didn't seem to weigh on America one bit.)
I don’t think (as this guy does) that we want to maximize after tax income. I think we want to maximize a decent life in an environment that doesn’t collapse around us. I’d take a very low after tax income in return for national health, an improved national pension plan, free education, good social services, and national programs to build affordable, low energy housing and a sustainable world.

For what it is worth, when Republicans were the dominent party in Minnesota and refusing to raise taxes, the people of Minnesota passed two constitutional amendments by popular vote. Both raised sales taxes, one to fund transportation in the state, the other to fund clean water, the environment and the arts. People will take less after tax income in return for social goods.
Read more at Naked Capitalism.

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