Monday, August 30, 2010

More on taxes, and Paul Krugman

Last week I posted a chart showing how taxes would change if the Bush tax cuts are allowed to expire. One reader commented that I had "conveniently" left out the top 1 percent. Which, of course, I hadn't. The average income of the top 1 percent is about $1.3 million, and my chart went to $5 million.

I got to thinking that maybe he was talking about the top 1/10 of 1 percent, as Paul Krugman mentioned in his editorial in the New York Times. Here's a paragraph or two:
But these same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country.
What — you haven’t heard about this proposal? Actually, you have: I’m talking about demands that we make all of the Bush tax cuts, not just those for the middle class, permanent.
Well, whether you agree with making all of the rate reductions permanent, or just some, the problem I have with Krugman, Nobel prize or not, is the above statement is hyperbole. He doesn't mention until later in the article that the $3 million dollar check would actually be 10 checks over 10 years, averaging about $300,000 per year.

Also, the figures I saw from the Tax Foundation (using IRS data), the number of people in the top 1/10 of 1 percent is 141,000 not 120,000, so I'm not sure what source he's using.

The average income of the top 1/10 of 1 percent is $7.4 million. Currently, the tax bill on that is $2.56 million. If the cuts expire for the top bracket, the tax bill goes to $2.865 million, an increase of $305,081. Here's Krugman's $3 million -- over 10 years.

He probably chose the $3 million over 10 years just to inflate the numbers. He doesn't mention the $3 million is over 10 years until later in the story, almost as an after-thought.

When reading Krugman, you must remember that he is a liberal, a self-admitted liberal who believes in big government. After complaining about deficits for so many years, he now supports even more government spending.

But I believe his economic theories aren't working. Nobel prize or not.


Fam Guy said...

Like the Health Care bill, the tax code is WAY too complicated for me to pretend to understand. However, Krugman is a recognized expert, with WAY more creds than you. I could list his qualifications and background, but you would blow it all off, cuz he is more 'liberal' than you, so obviously doesn't know what he is doing. As far as 'his' policies not working, you have no idea if they would, cuz they haven't been put into effect. Like Bernahnke, he is somewhat of an expert on the Great Depression (#1) and is fighting to keep us from sliding into #2 that your boys set us on the path toward. I don't agree with all Obama has done, but he is in uncharted water after with the mess he inherited. Krugman calls for more gov't help, basically saying screw the deicits, we need MAJOR help now, or we are going over the cliff. As I say, I don't pretend to know the answer (unlike some), BUT, I know we are in MAJOR trouble, after the Bush years, and ifwe keep on with business as usual, we are gonna just keep on sinking. Unlike you and/or me, Krugman has the education and background to make a credible case for saving our bacon, unlike the Repubs, who are just a bunch of obstructionists, that want nothing more than to win the next election so they can get back to the public trough and are offering NOTHING in the way of solutions.

Steve said...

I agree. The tax code is a travesity. It is so compilicated that no one understands it all, just like Obamacare and the financial reform act. The tax code panders to special interests. We need a flat tax. If the Russians and the Chinese (in Hong Kong) can do this, why can't we?

If you put 10 economists in a room, you'd get 10 different opinions. I learned this in graduate school (my field was communications, but the principle is the same).

I don't blow off Krugman becuase he's liberal; only because I disagree with him that deficits don't matter right now. I don't need a PhD to read and think critically on the matter.

Beside, I read most of his stuff anyway. And I also read Thomas Sowell, Phd, for a different perspective.