Posting Towards Gomorrah

[Tyrone Slothrop]

Originally posted by Spanky
So in essence you are saying that because I thought that parody of the homosexual lifestyle made it sound pretty fun, I must be a homosexual myself.

Yes Ty, you are right. I am actually a homosexual. You saw right through me. I was in denial. How could I possibly think that gay men are having fun unless I am actually gay myself. Thanks for getting me to accept reality and putting me in touch with my true inner self.

[I never took you for one of those moronic idiots that would label someone as being gay just because they said something complimentary about the homosexual lifestyle. In addition, I did not think you were one of those moronic idiots that actually thinks it’s funny (or derives some perverse pleasure) out of trying to get someone to admit they are Gay because you think the person in question would find it embarrassing or insulting. I guess I was wrong.]

You'll want to read the following aloud to get the punch line.

I was having these weird dreams last week. One night, I dreamed that Spanky was a teepee. The next night, I dreamed he was a yurt. The next night, he was a teepee again. The fourth night, again a yurt. So I went to my psychiatrist, and I told him about these dreams, and I said, "Shrink, what's going on?" And he said, "Well, the problem is easy to see: Spanky is two tents."

[Shape Shifter]

Originally posted by Tyrone Slothrop
You'll want to read the following aloud to get the punch line.

I was having these weird dreams last week. One night, I dreamed that Spanky was a teepee. The next night, I dreamed he was a yurt. The next night, he was a teepee again. The fourth night, again a yurt. So I went to my psychiatrist, and I told him about these dreams, and I said, "Shrink, what's going on?" And he said, "Well, the problem is easy to see: Spanky is two tents."

That made my teepee yurt.

[sgtclub]

Originally posted by taxwonk
The critique was two-thirds of the entry. Also, the one-third that was not a critique noted that it appeared the curve was not a true curve and was only a reliable predictor at the extreme margins.

I could say the same for any number of things. For instance, if I draw a random parabola and claim it establishes cooking preferences for ribeye steaks, I will be incredibly accurate in predicting that almost noone likes their steak frozen and raw or cooked to a smoldering hunk of carbon. It's only in the middle of the curve that my predictive ability goes down to near zero.

Read it again, Club.

And that is exactly what Burger pointed out. Your claim was that it was disproved.

[Secret_Agent_Man]

Originally posted by Spanky
So in essence you are saying that because I thought that parody of the homosexual lifestyle made it sound pretty fun, I must be a homosexual myself.

[Rant follows]

Geez -- a little sensitive Spanky? :comp:

[Wait, you don't still live with your mother, do you?] :kisscheek:

S_A_M

[Secret_Agent_Man]

Originally posted by Spanky
Yes Ty, you are right. I am actually a homosexual. You saw right through me. I was in denial. How could I possibly think that gay men are having fun unless I am actually gay myself. Thanks for getting me to accept reality and putting me in touch with my true inner self.

The tip-off, of course, was your attraction to 16 year olds.

S_A_M

[taxwonk]

Originally posted by sgtclub
And that is exactly what Burger pointed out. Your claim was that it was disproved.

I would suggest that proves my point. If a theory is only valid at the extremes, then it is not a valid theory.

[Mmmm, Burger (C.J.)]

Originally posted by taxwonk
I would suggest that proves my point. If a theory is only valid at the extremes, then it is not a valid theory.

Except the CBO study shows it is valid in the middle as well. What CBO showed was that we are on the uphill portion of the curve such that reducing taxes reduces revenue.

Sure, you can say the curve is lumpy or has multiple maxima, but there's even less support for that. Is it parabolic? No. Does it have a single maximum? Perhaps.

Club--your problem is that you think that t* (the rate obtaining maximum tax revenue) is somewhere below current rates.

Wonk--your problem is that you're trying to trash a very simplisitic theory that never purported to prove much of anything beyond a general principle on the ground that it is simplistic and fails to prove anything beyond a general principle. It's like saying supply and demand curves are an invalid theory because supply and demand have more determinants than price alone.

[sgtclub]

Originally posted by Mmmm, Burger (C.J.)
Club--your problem is that you think that t* (the rate obtaining maximum tax revenue) is somewhere below current rates.

Where did I say that? It may be the case, but I don't think I argued that here.

[taxwonk]

Originally posted by Mmmm, Burger (C.J.)
Except the CBO study shows it is valid in the middle as well. What CBO showed was that we are on the uphill portion of the curve such that reducing taxes reduces revenue.

Sure, you can say the curve is lumpy or has multiple maxima, but there's even less support for that. Is it parabolic? No. Does it have a single maximum? Perhaps.

Club--your problem is that you think that t* (the rate obtaining maximum tax revenue) is somewhere below current rates.

Wonk--your problem is that you're trying to trash a very simplisitic theory that never purported to prove much of anything beyond a general principle on the ground that it is simplistic and fails to prove anything beyond a general principle. It's like saying supply and demand curves are an invalid theory because supply and demand have more determinants than price alone.

I was talking about the Wikipedia piece, not the CBO study. However, I have never placed a whole lot of faith in the methods of the CBO. They seem to have a real talent for interpreting ambigupus data in a way that always supports their hypothesis.

My big disagreement with the Laffer curve is that I don't believe the demand for income is elastic. In fact, I personally believe it is the most inelastic thing in the world, with the possible exception of the demand for sex, and even sex has a refractory period.

Think about it for a moment. I demand for income were elastic, then why would anybody ever work once they had reached the point where their wealth was in excess of what they needed to support a couple of generations. And yet, Tiger Woods and Michael Jordan haven't retired. Nor has Warren Buffet and he's in his late 60s, isn't he?

[Mmmm, Burger (C.J.)]

Originally posted by taxwonk
My big disagreement with the Laffer curve is that I don't believe the demand for income is elastic. In fact, I personally believe it is the most inelastic thing in the world, with the possible exception of the demand for sex, and even sex has a refractory period.

Think about it for a moment. I demand for income were elastic, then why would anybody ever work once they had reached the point where their wealth was in excess of what they needed to support a couple of generations. And yet, Tiger Woods and Michael Jordan haven't retired. Nor has Warren Buffet and he's in his late 60s, isn't he?

Huh? You mean you don't believe that the labor supply curve for individuals is backward bending? I don't see how the elasticity or inelasticity has anything to do with it. Either way, if the supply curve for labor always slopes up (i.e., higher wages will always induce more labor); it's just a question of how great the change is.

Also, using outliers to prove a theory isn't usually the best approach. It's a particularly poor approach when you use those examples: Tiger's playing a lot less tournaments. Michael retired from his sport. And warren Buffet is about to. And they all have other reasons to keep earning: competition, competition, and charitable works.

[Mmmm, Burger (C.J.)]

Originally posted by sgtclub
Where did I say that? It may be the case, but I don't think I argued that here.

Implicitly. If you are arguing that lowering taxes will increase revenue, you are arguing we're on teh far side of t* of the laffer curve.

[taxwonk]

Originally posted by Mmmm, Burger (C.J.)
Huh? You mean you don't believe that the labor supply curve for individuals is backward bending? I don't see how the elasticity or inelasticity has anything to do with it. Either way, if the supply curve for labor always slopes up (i.e., higher wages will always induce more labor); it's just a question of how great the change is.

Also, using outliers to prove a theory isn't usually the best approach. It's a particularly poor approach when you use those examples: Tiger's playing a lot less tournaments. Michael retired from his sport. And warren Buffet is about to. And they all have other reasons to keep earning: competition, competition, and charitable works.

Econometrics isn't really my field, so I'm approaching the edge of my ability to discuss the issue. However, I am certain that the Laffer Curve purports to demonstrate the elasticity of taxable income earning. To put it in the terms it is most commonly expressed: the greater the tax rate, the less tax will be generated because the increase in taxes acts as a disincentive to work harder to earn more income.

I think that's a load of hogwash other than at the extremes. If you take issue with my examples, then you can substitute others. Examples include Oprah Winfrey, Jack Nicholson, Jay-Z. The point remains the same. They all do have other reasons to keep earning; the tax rate is not a determinative factor.

[Mmmm, Burger (C.J.)]

Originally posted by taxwonk
Econometrics isn't really my field, so I'm approaching the edge of my ability to discuss the issue. However, I am certain that the Laffer Curve purports to demonstrate the elasticity of taxable income earning. To put it in the terms it is most commonly expressed: the greater the tax rate, the less tax will be generated because the increase in taxes acts as a disincentive to work harder to earn more income.

I think that's a load of hogwash other than at the extremes. If you take issue with my examples, then you can substitute others. Examples include Oprah Winfrey, Jack Nicholson, Jay-Z. The point remains the same. They all do have other reasons to keep earning; the tax rate is not a determinative factor.

You're right on the first paragraph, at least on the "far" side of the curve. But if the tax rate were, say, 90%, on marginal income over $1m, would Oprah keep working? Not so sure. 99%? Probably not (of course, they'd find ways of getting non-taxable income instead "Oprah--today on location in Hawaii; tomorrow on location in Tahiti".) At some tax rate, people will see so little of the income that they would prefer to get their utility from non-taxable sources--i.e., leisure.

Aggregated across the economy, the effect will be more pronounced. The question is what is that tax rate at which in increased tax from a higher rate is more than offset by lower income to be taxed in the first place. The princple is no different than what is the profit maximizing price for a monopolist.

The reason Reagan had so much belief in the Laffer curve was, apparently, his experience in Hollywood. When he was an actor, the tax rate was something like 95%. Actors would earn enough from one film to hit that bracket. So they would do one film a year. At least, that's the anecdote I recall from Stockman's book.

[sgtclub]

Originally posted by Mmmm, Burger (C.J.)
Implicitly. If you are arguing that lowering taxes will increase revenue, you are arguing we're on teh far side of t* of the laffer curve.

I wasn't arguing anything, I just posted a story, although I do believe that there is a correlation between the Bush cuts and the increased revenues.

[taxwonk]

Originally posted by Mmmm, Burger (C.J.)
You're right on the first paragraph, at least on the "far" side of the curve. But if the tax rate were, say, 90%, on marginal income over $1m, would Oprah keep working? Not so sure. 99%? Probably not (of course, they'd find ways of getting non-taxable income instead "Oprah--today on location in Hawaii; tomorrow on location in Tahiti".) At some tax rate, people will see so little of the income that they would prefer to get their utility from non-taxable sources--i.e., leisure.

Aggregated across the economy, the effect will be more pronounced. The question is what is that tax rate at which in increased tax from a higher rate is more than offset by lower income to be taxed in the first place. The princple is no different than what is the profit maximizing price for a monopolist.

The reason Reagan had so much belief in the Laffer curve was, apparently, his experience in Hollywood. When he was an actor, the tax rate was something like 95%. Actors would earn enough from one film to hit that bracket. So they would do one film a year. At least, that's the anecdote I recall from Stockman's book.

You're heading for the extreme again. At a 95% tax rate, I agree with what you're saying entirely. When you start talking about the effect at rates of say, 28% vs. 35%, I don't think the principle applies. Neither tax rate is high enough to change income earning behavior.