Comments on: Wages, Productivity and Capital http://www.bob-mcteer-blog.com/wages-productivity-and-capital/ Bob McTeer's Blog Thu, 20 Nov 2008 21:42:25 +0000 http://wordpress.org/?v=2.6.2 By: T-Bone http://www.bob-mcteer-blog.com/wages-productivity-and-capital/#comment-6737 T-Bone Mon, 30 Jun 2008 17:02:21 +0000 http://www.bob-mcteer-blog.com/wages-productivity-and-capital/#comment-6737 Doesn't capital depreciation tax deductions make reinvestment essentially tax free? Or why not, for simplicity, tax only at the time of distribution in whatever form, leaving all reinvested or retained profits tax free. This shouldn't affect capital, and if anything would provide further incentive to reinvest. P.S., where have corporate tax reductions raised the tax revenues? I understand that for capital gains, people will wait to realize their gains until after a capital gains tax cut, or right before a tax increase, and some people are able to shift their income from ordinary income (subject to income tax) to capital gains when there is a tax advantage to doing so. But neither of those is a true increase in revenues. Just a timing issue or income shifting issue, respectively. Doesn’t capital depreciation tax deductions make reinvestment essentially tax free? Or why not, for simplicity, tax only at the time of distribution in whatever form, leaving all reinvested or retained profits tax free. This shouldn’t affect capital, and if anything would provide further incentive to reinvest.

P.S., where have corporate tax reductions raised the tax revenues? I understand that for capital gains, people will wait to realize their gains until after a capital gains tax cut, or right before a tax increase, and some people are able to shift their income from ordinary income (subject to income tax) to capital gains when there is a tax advantage to doing so. But neither of those is a true increase in revenues. Just a timing issue or income shifting issue, respectively.

]]> By: Matthew http://www.bob-mcteer-blog.com/wages-productivity-and-capital/#comment-6589 Matthew Tue, 03 Jun 2008 18:52:59 +0000 http://www.bob-mcteer-blog.com/wages-productivity-and-capital/#comment-6589 Another interesting aspect about the tax hike phenomena - as noted by Alesina and Ardagna in their 1998 piece entitled "Tales of Fiscal Adjustments", "successful adjustments are almost exclusively expenditure based, unsuccessful adjustments are almost revenue based." In othe words, hiking tax rates fails to "successfully" bring down the cyclically adjusted primary balance - reduced government spending is needed to accomplish that. (Also note that for countries that cut expenditures and experienced a "successful" fiscal adjustments - on average - "the rate of growth relative to G7 increases during and after successful episodes. Successful adjustments experience a spectacular investment boom during and immediately after, contrary to the other cases. Private consumption is stable during unsuccessful and increase in successful episodes." Thus, might cutting consumption-based government expenditures prove expansionary in the current situation, Stiglitz's recent commentaries in "Portfolio" magazine be darned? See the late Mr. Ed Gramlich's speech "Budget and Trade Deficits: Linked, Both Worrisome in the Long Run, but not Twins" for other comments on the primary deficit, and the potential benefits of reducing the deficit in the current situation). Another interesting aspect about the tax hike phenomena - as noted by Alesina and Ardagna in their 1998 piece entitled “Tales of Fiscal Adjustments”, “successful adjustments are almost exclusively expenditure based, unsuccessful adjustments are almost revenue based.” In othe words, hiking tax rates fails to “successfully” bring down the cyclically adjusted primary balance - reduced government spending is needed to accomplish that. (Also note that for countries that cut expenditures and experienced a “successful” fiscal adjustments - on average - “the rate of growth relative to G7 increases during and after successful episodes. Successful adjustments experience a spectacular investment boom during and immediately after, contrary to the other cases. Private consumption is stable during unsuccessful and increase in successful episodes.” Thus, might cutting consumption-based government expenditures prove expansionary in the current situation, Stiglitz’s recent commentaries in “Portfolio” magazine be darned? See the late Mr. Ed Gramlich’s speech “Budget and Trade Deficits: Linked, Both Worrisome in the Long Run, but not Twins” for other comments on the primary deficit, and the potential benefits of reducing the deficit in the current situation).

]]> By: cheapybob http://www.bob-mcteer-blog.com/wages-productivity-and-capital/#comment-6584 cheapybob Sat, 31 May 2008 23:10:08 +0000 http://www.bob-mcteer-blog.com/wages-productivity-and-capital/#comment-6584 Your comment about raising rates will result in lower revenues won't hit home till they see the collection plate, I'm afraid. If they scare investors out of the market, those few of us that still pay large amounts of tax won't be paying anything at all as result of our losses. IMO, the fiscal insanity of all the spending must end, and if it doesn't, things are going to get much uglier for America. That debt is going to hit the $10 trillion dollar mark next year, and after it does, who on earth would be so foolish as to lend us even more? Your comment about raising rates will result in lower revenues won’t hit home till they see the collection plate, I’m afraid. If they scare investors out of the market, those few of us that still pay large amounts of tax won’t be paying anything at all as result of our losses. IMO, the fiscal insanity of all the spending must end, and if it doesn’t, things are going to get much uglier for America. That debt is going to hit the $10 trillion dollar mark next year, and after it does, who on earth would be so foolish as to lend us even more?

]]> By: Nemo http://www.bob-mcteer-blog.com/wages-productivity-and-capital/#comment-6577 Nemo Wed, 28 May 2008 15:42:38 +0000 http://www.bob-mcteer-blog.com/wages-productivity-and-capital/#comment-6577 "It boggles the mind to know that and say, nevertheless, that 'fairness' demands it." But who would ever say anything so foolish? :-) Many economists seem to have a soft spot for Obama. (Volcker is the big example, but even conservatives like Mankiw has said surprisingly good things about him.) Thank you for bucking the trend. Unfortunately, it is not at all clear that any of the alternatives are better. "Economics 101" simply isn't a requirement for the Presidency, unfortunately. “It boggles the mind to know that and say, nevertheless, that ‘fairness’ demands it.”

But who would ever say anything so foolish? :-)

Many economists seem to have a soft spot for Obama. (Volcker is the big example, but even conservatives like Mankiw has said surprisingly good things about him.) Thank you for bucking the trend.

Unfortunately, it is not at all clear that any of the alternatives are better. “Economics 101″ simply isn’t a requirement for the Presidency, unfortunately.

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