Trickle down economics busted, Repubs nix report

[Symmetry]

Troubling stuff- non-partisan report on whether lowering taxes on the wealthy helps the economy gets nixed by partisan Republican politicos.

WASHINGTON — The Congressional Research Service has withdrawn an economic report that found no correlation between top tax rates and economic growth, a central tenet of conservative economic theory, after Senate Republicans raised concerns about the paper’s findings and wording.

Mitch McConnell, the Senate Republican leader, and other Republicans raised concerns with an economic report that questions a central tenet of conservative economic theory.

The decision, made in late September against the advice of the agency’s economic team leadership, drew almost no notice at the time. Senator Charles E. Schumer, Democrat of New York, cited the study a week and a half after it was withdrawn in a speech on tax policy at the National Press Club.

Link

[john9blue]

were the lower tax rates accompanied by a reduced government?

if you lower taxes without reducing spending, well no shit you're gonna have problems.

[Symmetry]

were the lower tax rates accompanied by a reduced government?

if you lower taxes without reducing spending, well no shit you're gonna have problems.

The report received wide notice from media outlets and liberal and conservative policy analysts when it was released on Sept. 14. It examined the historical fluctuations of the top income tax rates and the rates on capital gains since World War II, and concluded that those fluctuations did not appear to affect the nation’s economic growth.

I think they had the history pretty much covered, no?

[Army of GOD]

did somebody say nix?

[Symmetry]

did somebody say nix?

I can get a tricky dig at the Republicans from time to time.

[BigBallinStalin]

It examined the historical fluctuations of the top income tax rates and the rates on capital gains since World War II, and concluded that those fluctuations did not appear to affect the nation’s economic growth.

I love statistics. Gee, do changes in the top income tax rates and changes in the tax rates on capital gains account for the changes in economic growth? (i.e. do only two variables account for the dependent variable, economic growth?)

(1) Or could there be other relevant variables? Like other-top income tax rates? Changes in international trade policy? Liberalization of various industries? Etc.


Let's play econometrics.

(2) Suppose we shift that top percentage on income tax rates. Make top income tax rates = top 1%, and you get results A. Or make them the top 20% and you get results B. If you wish to show that "those fluctuations did not appear to affect the nation’s economic growth", then opt for the 1% top income tax rates because 1% is less than 20%. In other words, a top 1% income tax rate will have a relatively less impact on economic growth.


(3) Why do they omit the data before WW2? Gee... would that lead to an undesirable outcome?
Or is it after WW2?

(4) Regardless, if you remove the data during the Great Depression (which had high tax rates), then you can show more favorable outcomes to support the conclusion that "those fluctuations did not appear to affect the nation’s economic growth."


etc etc

[Symmetry]

It examined the historical fluctuations of the top income tax rates and the rates on capital gains since World War II, and concluded that those fluctuations did not appear to affect the nation’s economic growth.

I love statistics. Gee, do changes in the top income tax rates and changes in the tax rates on capital gains account for the changes in economic growth? (i.e. do only two variables account for the dependent variable, economic growth?)

(1) Or could there be other relevant variables? Like other-top income tax rates? Changes in international trade policy? Liberalization of various industries? Etc.


Let's play econometrics.

(2) Suppose we shift that top percentage on income tax rates. Make top income tax rates = top 1%, and you get results A. Or make them the top 20% and you get results B. If you wish to show that "those fluctuations did not appear to affect the nation’s economic growth", then opt for the 1% top income tax rates because 1% is less than 20%. In other words, a top 1% income tax rate will have a relatively less impact on economic growth.


(3) Why do they omit the data before WW2? Gee... would that lead to an undesirable outcome?
Or is it after WW2?

(4) Regardless, if you remove the data during the Great Depression (which had high tax rates), then you can show more favorable outcomes to support the conclusion that "those fluctuations did not appear to affect the nation’s economic growth."


etc etc

You seem to think it's wrong and want to figure out a justification post facto. Kind of a shame that the report got nixed, eh?

[BigBallinStalin]

Sorry, sir, any attempt to engage in rational debate with you is perceived as violent attacks against your person. Unfortunately, I must prevent myself from being enamored by your in-depth knowledge of the statistics which confirms your worldview.

[Symmetry]

Sorry, sir, any attempt to engage in rational debate with you is perceived as violent attacks against your person. Unfortunately, I must prevent myself from being enamored by your in-depth knowledge of the statistics which confirms your worldview.

Silly BBS- the stats you want got nixed for disagreeing with Republican party politics. I'd love to give you the report, alas, I can only provide the conclusions, and articles on why the Republicans nixed it.

[Metsfanmax]

(1) Or could there be other relevant variables? Like other-top income tax rates? Changes in international trade policy? Liberalization of various industries? Etc.

What the report demonstrates more than anything else is that there is no evidence for the claim that simply reducing the top tax rate increases economic growth. For the reasons you're hinting at, it does not necessarily prove the converse (that increasing the top tax rate is good for the economy). But over many decades it demonstrates that with a continual decline in the top marginal tax rate has not been correlated with a general increase in economic growth over that period (and they measured it a few ways, such as productivity and per capita GDP, both of which increase with the top marginal tax rate). They also determined that decreasing the top tax rates tends to concentrate income in the most wealthy. It may not be a smoking gun that increasing the tax rate on the wealthiest is always a good strategy, but it certainly disproves the claim that lowering taxes on the very wealthy has caused economic growth.

(2) Suppose we shift that top percentage on income tax rates. Make top income tax rates = top 1%, and you get results A. Or make them the top 20% and you get results B. If you wish to show that "those fluctuations did not appear to affect the nation’s economic growth", then opt for the 1% top income tax rates because 1% is less than 20%. In other words, a top 1% income tax rate will have a relatively less impact on economic growth.

That question is important but not relevant to current politics, because the tax rates on the "rich" are usually described in the context of changing the tax rate on the top 1% of earners.

(3) Why do they omit the data before WW2? Gee... would that lead to an undesirable outcome?
Or is it after WW2?

The years 1933-1945 were marked by a large economic depression and then a large war. Those were the primary drivers of economic growth, and it would be quite difficult to make conclusions about this period one way or the other when it comes to how the top tax rate affected marginal growth. During WWII, tax rates on everyone increased, so it's impossible to make assessments on how just the change on the top earners affected things.

[BigBallinStalin]

(1) Or could there be other relevant variables? Like other-top income tax rates? Changes in international trade policy? Liberalization of various industries? Etc.

What the report demonstrates more than anything else is that there is no evidence for the claim that simply reducing the top tax rate increases economic growth. For the reasons you're hinting at, it does not necessarily prove the converse (that increasing the top tax rate is good for the economy). But over many decades it demonstrates that with a continual decline in the top marginal tax rate has not been correlated with a general increase in economic growth over that period (and they measured it a few ways, such as productivity and per capita GDP, both of which increase with the top marginal tax rate). They also determined that decreasing the top tax rates tends to concentrate income in the most wealthy. It may not be a smoking gun that increasing the tax rate on the wealthiest is always a good strategy, but it certainly disproves the claim that lowering taxes on the very wealthy has caused economic growth.

Again, if you want to show that "lowering taxes on the very wealthy has not caused economic growth" you can take the variable (top income tax rates) and narrow it down to 1% or whatever you want.

When I ask about other relevant variables, I'm talking about ommited-variable bias. You're stuck thinking in terms of the two variables used in the study. You should think about the variables which were omitted.

(2) Suppose we shift that top percentage on income tax rates. Make top income tax rates = top 1%, and you get results A. Or make them the top 20% and you get results B. If you wish to show that "those fluctuations did not appear to affect the nation’s economic growth", then opt for the 1% top income tax rates because 1% is less than 20%. In other words, a top 1% income tax rate will have a relatively less impact on economic growth.

That question is important but not relevant to current politics, because the tax rates on the "rich" are usually described in the context of changing the tax rate on the top 1% of earners.[/quote]

It's completely relevant because tax cuts affect more than top 1% income tax payers. To what degree and how much are questions which have not been clarified ITT. It's relevant because it affects the findings of the study.

Besides, the 'rich' can be labeled as those making over $250,000, or it can refer to those making over $100,000. Or even those earning over $1,000,000 per year. Obviously, it's a vague term which lends itself to arbitrary reasoning.

(3) Why do they omit the data before WW2? Gee... would that lead to an undesirable outcome?
Or is it after WW2?

The years 1933-1945 were marked by a large economic depression and then a large war. Those were the primary drivers of economic growth, and it would be quite difficult to make conclusions about this period one way or the other when it comes to how the top tax rate affected marginal growth. During WWII, tax rates on everyone increased, so it's impossible to make assessments on how just the change on the top earners affected things.[/quote]

If you omit data that is relevant, it doesn't look good on the statistics--especially if you wish to examine tax rates, capital gains taxes, and their relationship on economic growth. I'm not sure how to make that any clearer for you.

Furthermore, if the omitted data provides a desirable result (i.e. X1 and X2 have no influence on Y1), then it would be tempting for the statistician to omit that data (e.g. pre-WW2).

[Metsfanmax]

Again, if you want to show that "lowering taxes on the very wealthy has not caused economic growth" you can take the variable (top income tax rates) and narrow it down to 1% or whatever you want.

Yes, but the point here isn't to make a conclusion about how to cause economic growth, it's to debunk one possible theory. Some Republicans claim that lowering the tax rate on the top 0.1%, say, is good for the economy. This article shows that there is absolutely no historical correlation (post WWII) between lowering taxes on those people, and economic growth. So it debunks the claim. That's all it was trying to do.

Obviously different people have different definitions of who the "rich" are that we should be lowering taxes for. But a large portion of the study deals with just measuring how a change in the top marginal tax rate affects economic growth, and a change in this tax rate does affect all of the millionaires, which are the group that are really the target here anyway (how many times have we heard "millionaires and billionaires" in the last few months?).

If you omit data that is relevant, it doesn't look good on the statistics--especially if you wish to examine tax rates, capital gains taxes, and their relationship on economic growth. I'm not sure how to make that any clearer for you.

Furthermore, if the omitted data provides a desirable result (i.e. X1 and X2 have no influence on Y1), then it would be tempting for the statistician to omit that data (e.g. pre-WW2).

There was a large period of economic growth in the few years prior to 1945, which correlated with large tax increases on the wealthy (as well as everyone else), so including that data would at the very least not have harmed their conclusion. They had no motive to disregard it except that it makes a lot more sense to compare periods of relative peace (post-1945) than it does to compare a period of war and period of peace. In a sense, they have eliminated one of the possible contributing factors by only considering data from this period.

[Night Strike]

You all are right........let's just raise the tax rate to 75% on all income over $250,000 and 90% on all income over $1 million since there will be absolutely no negative effects on the economy.

[Symmetry]

You all are right........let's just raise the tax rate to 75% on all income over $250,000 and 90% on all income over $1 million since there will be absolutely no negative effects on the economy.

Or, as the report indicates, you can cut taxes for the rich and pretend that it helps the economy, while suppressing non-partisan reports that indicate the contrary.

[Army of GOD]

let's tax NightStrike 100% and give all of his money to me

[Metsfanmax]

You all are right........let's just raise the tax rate to 75% on all income over $250,000 and 90% on all income over $1 million since there will be absolutely no negative effects on the economy.

Sucks when the facts don't go your way, huh?

[Night Strike]

You all are right........let's just raise the tax rate to 75% on all income over $250,000 and 90% on all income over $1 million since there will be absolutely no negative effects on the economy.

Sucks when the facts don't go your way, huh?

To think that massive taxes on people has no impact on the economy is absolutely ludicrous.

Why did the "study" ignore the real tax rates during those times due to massive amounts of deductions and people simply refusing to pay all their taxes (a lot of that was prior to forced-deductions)? Having a listed highest tax rate of 70% means next-to-nothing when you can claim deductions worth 60% of your income.

[Symmetry]

You all are right........let's just raise the tax rate to 75% on all income over $250,000 and 90% on all income over $1 million since there will be absolutely no negative effects on the economy.

Sucks when the facts don't go your way, huh?

To think that massive taxes on people has no impact on the economy is absolutely ludicrous.

Why did the "study" ignore the real tax rates during those times due to massive amounts of deductions and people simply refusing to pay all their taxes (a lot of that was prior to forced-deductions)? Having a listed highest tax rate of 70% means next-to-nothing when you can claim deductions worth 60% of your income.

Why do you think they were ignored? Pretty much anyone non=partisan seems to think it's sound.

[Metsfanmax]

You all are right........let's just raise the tax rate to 75% on all income over $250,000 and 90% on all income over $1 million since there will be absolutely no negative effects on the economy.

Sucks when the facts don't go your way, huh?

To think that massive taxes on people has no impact on the economy is absolutely ludicrous.

On the contrary, the report generally showed that there was an impact on the economy by decreasing taxes for the wealthy. It was just the opposite of what Republicans are claiming.

At any rate, you go on thinking that your pet theory of how the economy works is the way it ought to be. In economics there is only reality, not partisan politics or individual beliefs. I don't even think this study is that good, but at least someone's doing some real analysis instead of just making blind assertions about the way they think the economy should work.

[BigBallinStalin]

Again, if you want to show that "lowering taxes on the very wealthy has not caused economic growth" you can take the variable (top income tax rates) and narrow it down to 1% or whatever you want.

Yes, but the point here isn't to make a conclusion about how to cause economic growth, it's to debunk one possible theory. Some Republicans claim that lowering the tax rate on the top 0.1%, say, is good for the economy. This article shows that there is absolutely no historical correlation (post WWII) between lowering taxes on those people, and economic growth. So it debunks the claim. That's all it was trying to do.

Why am I repeating myself? I'm talking about the means of the econometric analysis. Okay? It's about omitting relevant variables and changing the data to lead oneself to the desired outcomes. Why do you refute that? Is it possible for them to do this? And have they done what I've been talking about?

[BigBallinStalin]

You all are right........let's just raise the tax rate to 75% on all income over $250,000 and 90% on all income over $1 million since there will be absolutely no negative effects on the economy.

Sucks when the facts don't go your way, huh?

How do you know that they are facts?

[john9blue]

their doctrine states that "facts have a liberal bias"

therefore, anything which supports their views is fact.

[BigBallinStalin]

You all are right........let's just raise the tax rate to 75% on all income over $250,000 and 90% on all income over $1 million since there will be absolutely no negative effects on the economy.

Sucks when the facts don't go your way, huh?

To think that massive taxes on people has no impact on the economy is absolutely ludicrous.

On the contrary, the report generally showed that there was an impact on the economy by decreasing taxes for the wealthy. It was just the opposite of what Republicans are claiming.

At any rate, you go on thinking that your pet theory of how the economy works is the way it ought to be. In economics there is only reality,

Hahah, no there isn't. There really isn't. For most economists, reality is abstracted into models. For example, when they try to understand the top-income tax rate and capital gains tax on economic growth, they're making a lot of assumptions about reality. Furthermore, as already mentioned, there's the problem of omitted variables--among other problems. Then, we get into the economist's description of GDP, which may not be worth going into.

The point is that you should not be so easily led astray because you've been dazzled by a news report which summarized one econometric article. If you are so easily dazzled, then you should be aware of the possibility that you are letting your confirmation bias do the critical thinking for you.

[Symmetry]

their doctrine states that "facts have a liberal bias"

therefore, anything which supports their views is fact.

Who's the "their" in your post?

[Symmetry]

You all are right........let's just raise the tax rate to 75% on all income over $250,000 and 90% on all income over $1 million since there will be absolutely no negative effects on the economy.

Sucks when the facts don't go your way, huh?

To think that massive taxes on people has no impact on the economy is absolutely ludicrous.

On the contrary, the report generally showed that there was an impact on the economy by decreasing taxes for the wealthy. It was just the opposite of what Republicans are claiming.

At any rate, you go on thinking that your pet theory of how the economy works is the way it ought to be. In economics there is only reality,

Hahah, no there isn't. There really isn't. For most economists, reality is abstracted into models. For example, when they try to understand the top-income tax rate and capital gains tax on economic growth, they're making a lot of assumptions about reality. Furthermore, as already mentioned, there's the problem of omitted variables--among other problems. Then, we get into the economist's description of GDP, which may not be worth going into.

The point is that you should not be so easily led astray because you've been dazzled by a news report which summarized one econometric article. If you are so easily dazzled, then you should be aware of the possibility that you are letting your confirmation bias do the critical thinking for you.

Presumably you're not ok with economic reports being suppressed by politicos either.