I know how Michael enjoys metaphors from the card table

Kevin Drum at Mother Jones offers a critique of Mankiw's assessment of how proposed income tax changes (letting Bush's deficit-enhancing tax cuts expire on high-end incomes) would affect him:

Do you see the card he palmed? Basically, the effect of letting the Bush cuts expire is so tiny that the only way to make it noticeable is to compound it over 30 years, which reduces his eventual payout from $2,000 to $1,700.

Ezra does an informal survey on the Laffer curve

My boy, Ezra, did an interesting exercise.

The idea behind the Laffer Curve is that there is some percentage at which revenue generated from income tax can be maximized. With tax rates at 0%, obviously no revenue is generated. At 100%, no revenue is generated because there'd be no reason to work. Somewhere between 0 and 100 is a sweet spot where federal tax revenue is maximized.

Ezra surveyed a couple economists and a bunch of politicians about where they think the Laffer curve peaks and presents their answers here.

Answers from Republican politicians and folks who lean to the right politically, tended to be well below 50%; Democratic politicians (looks like only two of them) were up around 70%. The two economists he asked identified top rates of 69% and greater than 60%.

Of course, as Martin Feldstein, Harvard, answered, maximizing federal revenue shouldn't really be a goal of tax policy, so in that sense the question is pointless. Further, half of the pertinent equation is missing when you ponder just the government-revenue-generation portion of the effect of tax rates. You should also be considering the effect on GDP or growth or something reflecting the effect on private sector income or wealth or something. But, still, the question is interesting for revealing how far apart are politicians' views. If you really believe setting income tax rates above 19% causes a drag on the economy, then of course you're going to fret about raising the top bracket from 35 to 39%. If, though, you think that you can raise rates to 70% without being an economic drag, then an increase from 35 to 39% for the top bracket is really not a big deal.

Tax brackets

Dshort.com has a graph of tax brackets through the years, superimposed with a budget deficit graph:


Update: I wonder what percentage of the population is aware of how high the highest tax brackets were from the 50s until Reagan in the 80s.

Do I just not understand?

This short little gem in the DMN caught my eye today. Am I the only person who thinks that if a toll road is losing drivers, you might want to lower the tolls, not raise them? The tolls were raised not too long ago and gee, guess what, less drivers. So the answer that the toll authority comes up with now is to raise tolls again. And in about 4-6 months, when they do another survey and see that driver ship has gone down again, I wonder what they will do?

In the not-too-distant future, most of the major and mid-major roads in the DFW area are going to be be either totally toll roads or some combination of mostly toll lanes and some free lanes. 635 (the main loop around Dallas) will have "smart toll" lanes that will price-adjust during peak hours and/or high volume in the free lanes. Perhaps the ultimate answer for low driver ship on toll roads is to make every road a toll road. Then the "nervous" bond holders will not have to worry so much.

Fair Tax

I read Boortz's book a couple of years ago and while it has merits, ultimately I'm not a supporter...if for no other reason that it would require a constitutional amendment. Else, we'd ultimately end up with both a national sales tax AND an income tax.

Tonight Hewitt is hawking his new book on the Fair Tax Fantasy.

Mom loved one Republican's endorsement of the Fair Tax during the primaries last year.

Now, for those who don't know, I live in a run down shack in what is probably Austin's toniest zip code. I do so not because of the neighborhood but because it is five minutes from my office. As everyone knows, Austin is the most liberal of all Texas cities. In my mind, it ranks right up there with many college towns in that respect...think Boulder. Stephanie could probably confirm what I've heard about Madison and Ann Arbor.

It may be the most liberal part of the most liberal city in Texas.

After the first wave in Iraq commenced, there were many, many flags flying in my neighborhood. What's so unusual about that? They were UN flags.

Today, I noticed something really unusual when I came home for lunch. A neighbor had a really tacky, handmade sign in his or her front yard. On white poster board scrawled in magic marker:

"Support the Fair Tax!" with a link to some kind of url that supports it.

A model of efficiency

New bill would tax AIG bonuses at 100%; from Newsday.