moldybluecheesecurds 2

Monday, May 07, 2012

"Mystery of the Disappearing Bees: Solved!” announced a Reuters headline. Ah, if only that were true...."

““Mystery of the Disappearing Bees: Solved!” announced a Reuters headline. Ah, if only that were true. Even if neonicotinoids were banned tomorrow, honeybees would still be in big trouble.”

- The honeybees are still dying - Boing Boing

Sunday, May 06, 2012

Approaching taxes from data, not politics

I came across these two analyses months ago and never had time to share.  Basically, it's an analysis of our federal income tax system doing two things:

  • Finding out if there's anything to the Laffer Curve
  • Determining what the optimal top marginal tax rate is for maximizing economic growth
The short answers are: no, it's upside-down; and, 65% should be the top marginal tax rate.

In more detail, then.  Economist Mike Kimel tackles the Laffer Curve first - an upside-down 'U' chart that purports to show an optimal top marginal tax rate to maximize growth.  In practice, partisan Republican "economists" use this to argue that tax rates should always be lower because it will actually mean more tax revenue.  

The data disagree.  Kimel illustrates that the proper Laffer Curve is a right-side-up 'U' – the Kimel Curve – with a minimum around 32% for the top marginal tax rate (the top rate is currently 35%, down from 90% or more during the 1950s and 60s, 50% during Reagan's first term and ~40% during the first Clinton term).  In other words, both raising or lowering taxes could theoretically raise revenue.

However, tax policy isn't really about maximizing revenue.  It's about providing services most efficiently and getting the best economic growth for the amount of taxes collected.  And the historical data suggest that the optimal top marginal tax rate is 64%.  It's a number that fits a lot better with the theory that government spending juices the economy (think education, infrastructure, and R&D) than the theory that government is stealing from the private sector's growth potential.