URLs du Jour


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  • Our Amazon Product du Jour is a book originally written in 1954 (and I originally read it not too long after). But, as Phillip W. Magness notes at AIER, it's a topic of continuing relevance: The [New York] Times’s Editorial Page Lies with Statistics.

    As the debate over wealth taxation rages on, journalists have assumed a central role in the dissemination of empirical claims about the distribution and historical trajectory of U.S. tax policy. Unfortunately several leading media outlets have approached this task by engaging in political advocacy on behalf of Elizabeth Warren and Bernie Sanders’ tax plans, sacrificing factual accuracy in the process.

    Phillip's issue is with a recent NYT editorial that asserted:

    In 1961, Americans with the highest incomes paid an average of 51.5 percent of that income in federal, state and local taxes. In 2011, Americans with the highest incomes paid just 33.2 percent of their income in taxes, according to a study by Thomas Piketty, Emmanuel Saez and Gabriel Zucman published last year.

    As Phillip notes, there are numerous well-documented problems with the Piketty/Saez/Zucman [PSZ] study. But the NYT manages to muck this up even further by cherry-picking its time period.

    The IRS didn't publish detailed statistics on taxpayer income until tax year 1962. But in that year, the top-0.1% tax rate according to PSZ was 43.6%.

    So PSZ claim that the rate dropped nearly 8 percentage points between 1961 and 1962 even without changes in the main tax rates. Miraculous!

    There are also problems with the other end of the NYT's timeframe, 2011. It was (it turns out) during a relative lull in tax receipts, mainly caused by capital losses realized post-recession. Things have rebounded since, but you will not learn that from the NYT.

    Phillip's conclusion:

    In short, the Times appears to have selected 1961 and 2011 to create the illusion of an 18 percentage point decline in the average overall tax rate paid by the wealthiest earners. The actual decline, measured from the earliest microdata year 1962 to the most recent available year in 2014 shows a top average tax rate change from 43.6% to 39.8% – or only 3.8 percentage points in 50 years.

    My non-economist conclusion: don't trust the New York Times.

  • I was favorably disposed to Marco Rubio until his disastrous pre-primary debate performance up here in New Hampshire in 2016. OK, he's young, he could bounce back in 2024, right?

    Well, not if David Harsanyi has anything to say about it: Marco Rubio & Capitalism -- Republican's Bizarre Turn against Capitalism.

    Not even socialist Bernie Sanders could have unfurled a more exhaustive vilification of the market economy than Marco Rubio did in his recent Catholic University speech defending “common-good capitalism.”

    If you think I’m exaggerating, note that the former Tea Partier now blames capitalism for stifling innovation, undermining religious institutions, stripping workers of their dignity, corroding good will among men, and driving childlessness, hopelessness, and suicides.

    Rubio's proposed "solutions" are ludicrous (expand the federal per-child tax credit, paid parental leave) and cronyistic ("reform" the Small Business Administration, "invest" in rare-earth mineral mining). Or, as David puts it, punishing "big corporations" for not making the business decisions Mario thinks they should.

    Because Mario's a lot smarter than those CEOs, y'know.

  • A sober look from AEI's James Pethokoukis on The Warren wealth tax, innovation, and consumer surplus. It's another example of what's "seen and unseen" in the economy.

    Elizabeth Warren’s new campaign ad returns fire on American billionaires who’ve criticized her wealth tax idea. Her counter attack: “All we’re saying is when you make it big, pitch in two cents so everybody else gets a chance to make it.” 

    Let’s put aside the reality of the eye-roll-inducing bit about the “two cents.” What Warren is suggesting is that building a business mostly helps the builder. Everyone else, maybe not so much. That sort of thinking always reminds me of the great paper from Nobel laureate economist William Nordhaus, “Schumpeterian Profits in the American Economy: Theory and Measurement.” In it, Nordhaus takes a stab at determining who really gains from the value generated by innovation, the producer of the innovation or the consumer of the innovation. 

    His findings: “We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers” And by “most,” he means almost all of the benefit with innovators “able to capture about 2.2 percent of the total social surplus from innovation.” Makes a rough sort of sense when you think about it. Consider what Jeff Bezos is worth — a lot — versus the value generated by his nearly trillion-dollar company — a whole lot more.

    This isn't difficult for even non-economists to understand. But when you're a power-hungry politician whose route to higher office depends on demagoguing the issue and demonizing the rich, it pays to ignore it.

  • And Jeff Jacoby looks at The counterproductive cruelties of occupational licensing.

    COSMETOLOGISTS AND emergency medical technicians don't have much in common.

    Cosmetologists treat skin, style hair, and paint nails. EMTs respond to 911 calls, administer urgent medical care, and rush patients by ambulance to hospitals.

    Cosmetologists are beauty-industry professionals who help people feel good about their appearance. EMTs are first responders who help people survive violent traumas and heart attacks.

    Cosmetologists rarely face a life-threatening crisis on the job. EMTs make life-or-death decisions every day.

    But there is one thing cosmetologists and EMTs do have in common: Both must be licensed by the state. The amount of training and experience needed to obtain those licenses, however, could hardly be more different. An applicant for a Massachusetts EMT license has to complete just 150 hours of education in order to qualify. But anyone seeking a cosmetology license faces a far higher hurdle: An applicant must log 1,000 hours of education, plus two full years of hands-on experience, before the Commonwealth of Massachusetts will allow them to go into the beauty business.

    MA leaves some licensing decisions to municipalities. My favorite example is Salem's regulation of "fortunetellers, psychics, and other similar businesses".

    Because you can't have fake psychics making money off customers! That would be wrong!