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Comments on: The President’s Taxes

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By: Voluntary Taxes «  Modeled Behavior

Sat, 07 May 2011 05:02:37 +0000

[...] ~ May 7th, 2011 in Economics | by Karl Smith Via this Greg Mankiw post I am pointed to a post by Steven Landsburg that argues Just a couple of days ago, President [...]

By: Steve Landsburg

Fri, 29 Apr 2011 05:31:01 +0000

Ben: A fair point. Thanks for sharing it.

By: Ben

Fri, 29 Apr 2011 01:53:00 +0000 The Obamas did donate a large percentage of their income. What Obama is saying is that the nation's wealthiest don't typically give back to social programs. Since we cannot trust the nation's wealthiest to actually provide for the rest of the country on their own, we should raise their taxes

By: Charles Dolci

Thu, 28 Apr 2011 01:09:12 +0000

My apologies if someone has already made this point - I didn't feel like reading all 122 responses. The problem with the talk about "taxing the millionaires and the billionaires" is that Obama et al. are comparing the proverbial apples to oranges. The term "millionaire" and its bigger brother whose name begins with a "b" imply "wealth", our tax code taxes income. Something altogether different. I suspect that many of those m/billionaires made a big chunk of their wealth through long term capital gains, which are taxed at a lower rate than ordinary income. The President and his m/billionaire buddies can talk about raising tax rates, but as long as it only taxes income their fortunes are safe. Let's see how they like it if Obama and Congress were to start talking about taxing the m/billionaires wealth. After all, how tough is it to get by having a net worth of, say, $10 million. Tax 100% of all wealth over $10 million and see who squawks.

By: Gordon

Wed, 27 Apr 2011 20:05:05 +0000

And for what it's worth: 1. If I had a chance to gamble $100 with a 1/1000 chance of winning $150,000, I still wouldn't do it. (Obviously some people would.) 2. But I'd surely give you $100 if I knew you'd immediately give me $150 or even just $101. So if I say that everyone should hand over $100 each because the aggregate benefit would be worth more than the aggregate contribution, my unwillingness to take the gamble (#1) doesn't make me a hypocrite in the way I arguably would be if I were unwilling to do #2.

By: Gordon

Wed, 27 Apr 2011 19:52:45 +0000

I should have mentioned that the same applies to Obama sending an extra $1,000 or $1, etc.

By: Gordon

Wed, 27 Apr 2011 19:51:06 +0000

Steve Landsburg, Your original argument would have it that Obama is a hypocrite if he is unwilling to send an extra $100k to the Treasury because that incremental $100k would cause $100k of incremental spending, presumably worthwhile in his view. But again, that doesn't mean he's a hypocrite even IF (and we don't know this would be the case) his assumption were, say, that there is a 1/10,000 chance that his $100k would cause $1 billion in incremental spending. I don't know if your premise re: "standard consumer theory" is valid, but even assuming that it is valid, and even making that prior assumption re: probability and magnitude, I think it's presumptuous to maintain that he'd be a hypocrite for not wanting to gamble in that way. That would be risk aversion, not hypocrisy.

By: Steve Landsburg

Wed, 27 Apr 2011 19:21:51 +0000

Gordon: Standard consumer theory predicts that when the amounts at stake are small, people maximize expected value without regard to risk. So this suggests that Obama should at least be making a *small* additional contribution to the government, no?

By: Gordon

Wed, 27 Apr 2011 19:06:21 +0000

Steve Landsburg, I don't know if you saw my follow-up comment at where I acknowledge the "expected value" argument. As I said, this is quite different from your assumption that $1 of incremental revenue WILL (or is even likely to) cause $1 more spending, and it is playing quite fast & loose with magnitudes and probabilities to simply assume that this lottery-type situation nets out to expected value of $1 of incremental spending (that could be way off, because the magnitude at which the rounding of a revenue figure effects incremental spending is not necessarily related to the magnitude OF incremental spending). Moreover, expected value of $1 is not the same thing as a sure thing or even a likelihood, and your argument (your accusation of the individual of hypocrisy) is based on the individual seeing such certainty or at least likelihood that his additional dollar will yield equivalent benefit, not the individual buying a fiscal policy lottery ticket. If Joe Taxpayer (or Obama) favors a higher top tax rate to fund higher spending, he should (your argument goes) be willing to volunteer individually to pay $1 more or $100k more in taxes if it WILL be used for equivalent incremental spending, but even if one accepts that argument, it is not the same to call Joe a hypocrite for not wanting to buy a lottery ticket with overwhelming likelihood of no benefit, and extremely small probability of causing a vastly disproportionate increment in spending. Joe may not be the gambling type. That doesn't make him a hypocrite.

By: Steve Landsburg

Wed, 27 Apr 2011 18:40:42 +0000

Gordon: It is EXCEEDINGLY unlikely that any given PARTICULAR one dollar of incremental revenue would cause a new spending program to be created, But according to your story, there is at least some chance that one PARTICULAR dollar will trigger a whole new multi-billion dollar spending program --- so that in expectation, that dollar has, well, just about a dollar's worth of effect.