Few people are capable of expressing with equanimity opinions
which differ from the prejudices of their social environment.
Most people are even incapable of forming such opinions.
Albert Einstein
73% Top Marginal Tax Rate? NO!
A key concept behind progressive tax nonsense is diminishing marginal utility;consider eating. After consuming a minimal and nutritionally sufficient diet relative to your metabolism and activity level, there is little benefit to eating surplus calories, which may simply get stored as fat. Now consider income. You have living expenses--food, shelter, clothing, utilities, transportation, etc. Taxes are another expense. Lower-paid households may barely make enough to cover their essential bills, never mind discretionary purchases or saving towards a house college or retirement, while higher income people really don't need--but which would be immediately spent by lower-income households. Hence it is preferable to assess tax dollars from those with the lowest need for discretionary dollars.
The second point I want to make has to do the Laffer curve. Let me use Wal-Mart's low-price model. (I'm making simplifying assumptions.) Higher prices and margins unfortunately mean lower sales volume (supply/demand). Selling at or below cost is mot a long-term business model. There is some price/margin where aggregate profitability is maximized. A similar consideration takes place with government taxes income. What that optimal rate is the matter of much controversy. A couple of Nobel laureates Diamond and Saez argue that rate is 73%. There are a couple of things to keep in mind: (1): economist models are not good approximations of the real economy; (2) short-term effects are easier to model than long-term effects.
The tax change will have two effects. The first is the mechanical effect of additional revenue flowing to the government as a consequence of the higher tax rate.Holding all else constant, a higher tax rate results in more money going to the government. The second is the behavioral effect. Holding all else constant, the higher tax rate lowers taxable income for several reasons, which reduces the revenue flowing to the government. The mechanical effect is easy to understand. In our example, the government collects 10 percent more of every dollar of income earned in excess of. $400,000 from every person who earns that much. So mechanically, the government will see its revenue rise. If the government redistributes the additional revenue, then middle- and low-income earners will see their consumption increase as a result of the tax change.
The behavioral effect captures how the behavior of top earners changes in response to the new tax regime. When faced with higher taxes, some wealthy people may work less, some may substitute earnings for other forms of income that are taxed at lower rates (like capital gains), some may move activities overseas, and some may engage in tax evasion. Because all those behavioral changes reduce the amount of taxable income that wealthy people report to the government, they can be summarized by looking at how much taxable income varies with the top tax rate.Let me be clear where I stand: the primary issue is not maximizing tax revenue but minimizing statist spending because surplus revenues mask inefficiencies in statist spending and starve the real economy of resources for economic growth. Raising taxes imposes unproductive extra costs to increasing income. It's obvious to me the flatter the tax rate, the more certainty and fewer distortions to individual and business decision making.
The Minimum Wage
I've mentioned in the blog I visited my maternal grandfather/godfather while the rest of my family was at an air force base in Germany. My grandfather never drove, so he had me take a taxi from the Providence airport to his house in east Fall River. The cabdriver kept badmouthing Fall River all ride long thinking I must be moving there and thinking of trying to find work; the economy was dead, no jobs, no future, etc. For those who don't know, Fall River once had a thriving textile industry, probably a big reason luring my ancestors and other French Canadian immigrants.
What happened? The South decided to diversify their economies with lower cost labor, closer proximity to supplies (like cotton), etc: lower cost mills FDR and Massachusetts politicians introduced a minimum wage which did not affect higher paid Northeast textile workers but served to undermine emerging Southern textile mills. This did not help unemployed workers willing to work at lower wages--and it certainly didn't help consumers. Forget the high-sounding rhetoric:it was pure crony labor protectionism. (HT Cafe Hayek)
Walter Williams. a George Mason economist of color, explains how minimum-wage laws were used to undermine black employment prospects in South Africa:
Minimum wages can have a more insidious effect. In research for my book "South Africa's War Against Capitalism" (1989), I found that during South Africa's apartheid era, racist unions, who'd never admit blacks, were the major supporters of higher minimum wages for blacks.
Gert Beetge, secretary of South Africa's avowedly racist Building Worker's Union, in response to contractors hiring black workers, said, "There is no job reservation left in the building industry, and in the circumstances I support the rate-for-the-job [minimum wages] as the second best way of protecting our white artisans." Racists recognized the discriminatory effects of mandated minimum wages.Entertainment Potpourri
More Favorite Cable Holiday Flicks (an Annotated Selection). For earlier segments, see my "Christmas Favorites' tag to the right. (Last minute edit: Lifetime presented one of the most compelling Christmas romances ever: "Love at the Christmas Table", a unique movie that traces a lifelong relationship from childhood, complete with arguing with each other. The last half hour includes a moving, unusual proposal involving Kat's father. But Sam has a unique proposal of his own.)
- The Christmas Hope:.This is the final segment of the Christmas Shoes trilogy (if you recall, the Newsong Christmas classic (below), Nathan Andrews is the young boy whom desperately wants to buy special shoes for his dying mother. Nathan is inspired by his mother's passing to become a doctor.. In this story, Nathan plays a minor but significant role: he and his wife are expecting their first child; Nathan was an attending physician when the Addisons (an airline pilot Mark and his social-worker wife, Patty) lost their only child, a college-age young man, Sean, in a tragic accident. Nathan recovered an object that was dropped as Sean was rushed to the operating room, Years later Nathan meets but doesn't immediately recognize Patty as she brings in the baby daughter (with health problems) of an addict; Nathan's wife is arguing that he must return he object to Sean's parents. The Addison's marriage is on the rocks as Patty seems to blame Mark for Sean's death because Sean had timed his trip home to accommodate his dad's flight schedule
Traci Adams is the struggling waitress single mother of adorable 9-year-old Emily; Traci is an aspiring singer-songwriter whom is planning an American Idol audition and has promised Emily a very special Christmas gift. Traci has to leave Emily alone while she runs an errand but promises to come back soon so they'll decorate the tree together. While Traci is walking across an unplowed street, the vehicle apparently hits a patch of black ice and hits Traci, whom dies soon thereafter.
Patty brings Emily, in an initial state of shock and denial, home with her. Mark and Emily almost immediately bond, and it breaks your heart when Emily hopefully asks Mark if the Addisons will adopt her. (Among other things, Traci had a surviving brother whom is not a good person but holds preemptive rights in Emily's adoption.) You just want to hug, kiss, and comfort the little sweetheart. I won't summarize the rest of the movie here. My favorite of the trilogy; I usually don't watch movies other than musical or certain classics more than once. I've probably watched this one a dozen times.
- The Christmas Card. Cody Cullen is an unattached military vet serving in Afghanistan whom gets a remember-the-troops card written by a church volunteer in Nevada City, CA, Faith Spelman, the daughter and accounting clerk of a lumber mill operator, Luke Spelman. After a close buddy is killed, his superior orders him to take leave back in the States. After returning his buddy's dog tags to his widow and lured by the Christmas card, Cody finds himself in Nevada City and meets Faith in passing at a diner. Luke, a military vet himself, befriends Cody at an after-church social. After Cody rescues Luke from the path of an approaching vehicle, he agrees to work the balance of his leave at the mill for room and board at the Spelman home. Cody is smitten with Faith, but there's a problem: she already has a serious boyfriend. I won't summarize the rest of the movie.
I will slightly criticize the storytelling here At one point, Faith needs to find Cody, and Luke suggests that Cody, the son of a Vietnam War veteran, probably was at the local war memorial before leaving town. It seems unlikely that Cody would be dawdling at a memorial long enough for Faith to find him there. I probably would have written a chance encounter.
A similar credibility problem is in another favorite "Farewell, Mr Kringle". Mr. Wilson, 50 years earlier, became a young widower when his wife, a nurse named Betty, was in a fatal auto accident rushing home in bad weather, Wilson decided to honor his wife' memory by celebrating her favorite holiday Christmas; he legally changes his name to 'Kris Kringle' and plays the local town Santa This is his golden anniversary year; in any event, nobody can figure out why Kringle didn't show up one day, the anniversary of his wife's death. Blogger Annabelle realizes the occasion and finds him at his wife's graveside finishing up paying his respects. Again, this coincidence comes across as contrived
- "Dear Santa". 24-year-old unattached heiress Crystal, whose parents are on the verge of cutting her off, in window-shopping when a gust of wind grabs 7-year-old Olivia's letter to Santa, asking him for a new wife for her dad Derek. Derek has a snow-plowing business but he is continuing to run his late wife's soup kitchen, where Crystal volunteers in an attempt to meet Derek.
Scrooge (the Musical), "Thank You Very Much"
