Nov 07 2008
Welker’s daily links 11/06/2008
Published by Jason Welker at 12:30 am under Daily Links
- The Folly of Obama’s Tax Plan — The American, A Magazine of Ideas
“Senator Obama’s proposed ‘tax cuts for the middle class’ are actually marginal rate hikes in disguise.
Senator Barack Obama declared recently that he wants to “reform our tax code so that it rewards work and not just wealth.” We think that is a great goal if it means a simple tax system with low marginal tax rates. Unfortunately, a close inspection of Obama’s proposals reveals something disquieting: he would raise marginal tax rates for many middle-income taxpayers, a bad move for anyone seeking to promote economic growth.
Although Obama is offering a new series of tax breaks, they undermine rather than improve economic incentives. First, whether or not you get those breaks will depend on your income. In Washington, taking away tax breaks as families work harder to make more money is called a “phase-out.” Economists have a different name for it—we call it a tax. Reducing a person’s tax credit as his income goes up also reduces his incentive to earn more income.”
I just don’t know if I buy the whole “Laffer curve” argument this article seems to support. The disincetive to work hard when tax credits are phased out as a household moves into a higher income bracket. Of course tax credits need to be phased out as households become less dependent on them due to higher incomes.
Referring to higher marginal taxes as “penalties to work” is a rhetorical trick. Higher income earners pay higher marginal taxes in every developed country the world over. The evidence that progressive taxes discourage hard work and professional advancement lacks empirical evidence, despite Arthur Laffer’s famous curve and the “trickle-down” Reaganomics of the ’80s.
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Reasons to be optimistic about growth – International Herald Tribune
As the daily procession of disheartening numbers continues, it’s clear that many bulwarks of the global economy are heading into recession. Even fast-growing countries in the developing world are preparing for a downshift. At moments like this, it’s worth asking: What will make the global economy grow again?
Economic growth is the reason we are not living in shelters made from brush and collecting nuts and berries to survive. The first step was using experience and technology to improve the way we produced food. Once a person could make more than enough food for himself, he could trade some of it with someone else or spend some of his time producing something else.
From those early days forward, economic growth has had only four sources: discovery of natural resources, a bigger or better labor force, innovations in technology and the linking of markets. The first two factors are self-explanatory. The third involves finding new ways to combine labor, tools and raw materials, either to make new products or to make old ones more efficiently. The fourth is a matter of scale and synergies.
Posted from Diigo. The rest of my favorite links are here.
About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course.
Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this authorRelated posts:
