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In a few posts, we’ll begin digging through the evidence on taxation and economic growth. In the meantime, I just wanted to ask if you were familiar with:

Now, neither of those papers discusses the rich as its sole focus – but let me put forth a wild idea … don’t the Keynesians argue that in some cases, like today, it doesn’t matter what money gets spent on, just so that the money gets spent? And don’t the tax-the-rich folks argue that the rich waste their money on frivolities? That the rich don’t really get any happiness from their spending?

But the papers above suggest that multipliers on taxes are far larger than multipliers on government spending. That also must mean that the “shrinkipliers” must be larger for increases in taxes than they are for reductions in government spending. And we seem to agree that the rich do spend their money somehow. Well, if you are a dedicated Keynesian, and you understand that papers such as the ones above actually exist, then why do you care? Why are we trying to dress up the sentiments in economics when that has nothing to do with it?

4 Responses to “Dear Tax the Rich People”

  1. Speedmaster says:

    I’m not familiar with those two works, but I have seen a ton of Hope/Change bumper stickers, so that still makes me an authority on the topic, right? 🙂

  2. Harry says:

    Every time they want money, they talk about the multiplier, the Keynseans’ version of writing home from college to finance the next weekend soirée. The ploy is for money to buy textbooks (Race to the Top), where the real reason is two nights at the Towne House Motel (biological research) and booze (organic chemistry lab expenses). When Robert Reich reminds Larry Kudlow, “Don’t forget the multiplier!” you know it’s going to be a one-night stand.

    I was surprised to see an analysis of 1975 tax reductions, since those reductions escaped my scrutiny, even though I did my own taxes, plus another ream of schedules for a corporation incorporated in New York. I would have chosen the 1977-1985 period; just like Double Jeapordy! the prices doubled, and the scores really changed.

    And no, the tax-the-rich folks are not going to pay the slightest attention unless the rate/revenue curve is a straight line. In this case Fritz Hollings and Paul Krugman are twins.

    Great observation, Speedmaster!

  3. Rod says:

    I think the 1975 tax reductions must have been the relief from the Nixon “surcharges” in the earlier 70’s. Ford was not a believer in supply-side tax cuts, for sure. Whip inflation now!

    I also have this theory that all of our economic woes since Phase II Price Controls have their roots in the Nixon Price Controls, where bureaucrats got the chance to peg the price of baler twine at $10 per bundle. You have to wonder where the price controllers worked after their mission was over? Did they stay in government and become drones at the Department of Energy?

    Today it is chilly, so I am going to resurrect my hair shirt and cardigan sweater and have a conversation with mah liddle dawtah Amy in the Rose Garden.

  4. jb says:

    Very astute observation Speedmaster. Reveals quick starkly their true agenda, which is power.

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