This is where we can talk about taxes, government spending, and other economic topics!

I want to start off with marginal tax rates being inefficient at collecting revenue and having a negative impact on the economy.

In the US if you look at our income tax receipts as a percentage of GDP it has never exceeded 10%.



It doesn't matter how high it is or how progressive it is it seems to cap out around 10% of our GDP. Even in inflation adjusted dollars it steadily increases year after year even after taxes are cut. Never seeing a decline of more than 5% from the previous year.



The argument that increasing the income tax beyond what it currently is will increase revenue seems really weak. No one seems to be able to squeeze that much more revenue out of their GDP.



OECD doesn't really let you display income tax revenue per capita but it lets you display all tax revenue per capita.



Even here though the US generates just as much tax revenue as other even higher tax nations sometimes more. They have larger statutory income tax rates, VATs, and other miscellaneous taxes that the US doesn't have.

I could continue about how the income tax negatively impacts productivity, especially high progress and marginal rates but lets start here first. Do the numbers lie or is there really no compelling reason to have a progressive or high income tax?

Might do a big post repudiating capitalism later.

Capitalism without ameliorating social elements that is.

I am just really amazed with how well OECD lets you sort and display data. There is just so much of it and you can make graphs from the browser. I am more curious though if anyone can justify an increase in the income tax when it doesn't seem to generate any revenue. It is a very popular proposal but they seem to avoid the concept when it is displayed like this.

You can even look at France who generated 3.4% of their GDP in income tax revenue which is half the size of the US tax revenue from the income tax when compared to GDP. This is even made worse when you remember that US GDP per capita is higher than any of these nations.

The US isn't going to generate anymore revenue by increasing the rates. They can simply cut back on deductions and breaks and broaden it to maximize the revenue gained. Excepting that the US should adopt a federal sales tax if they want more tax revenue but I would rather they simply cut spending of waste and giving state governments room to pick up some federal responsibilities. The later can figure out the best way to raise revenue and spend the money in the most optimal way.

I am sad that pay for upper management and CEOs has increased over the last few years but pay for lower level employees has mostly stagnated, how do companies plan to sell people things if they have no money to buy them?

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Do you have a source that their incomes have stagnated?

US median incomes are really high compared to most other nations, especially when you factor in cost of living.

This blog breaks down a lot of the numbers:

https://mises.org/blog/if-sweden-and...poorest-states



It is median income compared to cost of living as the cost of living is generally lower in the US. If Germany was a US state Germany would have a lower median income than every single US state.

http://www.pewresearch.org/fact-tank...d-for-decades/

http://www.cbsnews.com/news/an-end-t...p-5-2-percent/

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Why only factor for inflation though? What about cost of living? People 50 years ago didn't have smart phones or flat screen TVs. They didn't have internet. None of that seems to be factored in this article. It doesn't have much beyond the aforementioned starting point either. Average wage could have always stagnated alongside inflation. I am not really sure what they are sampling either. It was non-farm non-supervisory private jobs. Are they talking about only hourly workers?

Even in the link it talks about wages only going to the top but even then the change seems fairly minor. People at the top getting richer doesn't necessarily* mean people on the bottom are getting poorer.
This one seems to be using an entirely different metric than the one you linked above. Wages do tend to reach pre-recession levels eventually.
Poverty is a relative metric though. Here is how the Census defines poverty.

Following the Office of Management and Budget's (OMB) Statistical Policy Directive 14, the Census Bureau uses a set of money income thresholds that vary by family size and composition to determine who is in poverty. If a family's total income is less than the family's threshold, then that family and every individual in it is considered in poverty. The official poverty thresholds do not vary geographically, but they are updated for inflation using the Consumer Price Index (CPI-U). The official poverty definition uses money income before taxes and does not include capital gains or noncash benefits (such as public housing, Medicaid, and food stamps).

So benefits and taxes are not taken into account when calculating poverty and neither is cost of living. Emphasis is mine.

You can find those income thresholds here.

https://www.census.gov/data/tables/t...hresholds.html

So it changes every year based off of inflation. It seems to be based off of three times what ever was the minimum diet for food was defined as in 1963.

I don't think it is as bleak as those articles suggest. I think the best way to help the impoverished is to lower their cost of living and increase their K-12 opportunities. Make sure college isn't the only way to succeed in life by encouraging entry level jobs and vocational schools. An efficiently run government and economy just means things will be cheaper and wages will be higher. Every process or technological advance will make even the poorest richer than the generations of the past.

Your comments actually make the Pew research even more deleterious to your argument. Cost of living and inflation has gone up while wages have remained relatively stagnant.

The OMB has also criticized its own methodology on this, specifically that they know that benefits have become even less functional (e.g. cost of healthcare and move to 401k's so that companies don't have to support new employees the way they did old ones) and costs aren't being properly calculated (e.g. it's become mandatory to have reasonable internet if you want to succeed, and the cost of good internet access is unreasonably high due to ISP price gouging).

This also doesn't account for reduced social safety nets, as opposed to the 1950's, 60's, and 70's (pre-Reagan and deregulation).

The acceleration of technology has exacerbated this issue as technological obsolescence (both actual and planned) has made maintaining access more difficult. A mobile phone purchased five years ago is now actually less functional than one purchased 15 years ago because the former requires consistent hardware-software parity while the latter is only necessary for the act of telephony and text.

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Rationalizing the irrational since 2005.

Source on cost of living going up faster than inflation?
The social safety net wasn't reduced. We spend more money on welfare now than we have ever done so. Reagan couldn't really cut spending because he had a Democratic congress. He cut taxes which didn't really have any impact on revenue if you look at my initial chart. His deficits were caused by his defense spending increases and the natural growth of our non-discretionary entitlements which grew faster than inflation.



You can even look at this one.




The reason it grows so fast is because government spending drives up demand which increases cost so the government has to spend more money the next year in order to save the same affect as the previous year. It also doesn't do the best job at getting people out of poverty because of that cost increase and the way a lot of them are designed they act more like a trap than a hand up. There are a also a lot of demographic issues that make things like Social Security more expensive. The federal government doesn't have an interest in creating a poverty program that works.

You can survive off of a cheap phone that can only text and calls. Poor people have smart phones because they want them.

I said both cost of living and inflation went up, not that it's one versus the other.

Here's one link (albeit not hard data).
https://reason.com/archives/2016/01/...gnation-in-the
https://www.washingtonpost.com/archi...-0e2f3744689c/

Even by just the end of Reagan's term, it was obvious that his proposals had done more to gut than help reforms. This doesn't even get into the specifics that have been hot topics for conservatives (e.g. heating oil subsidies for impoverished house holds).

Social Security and Medicare/Medicaid are not the sum total of the social safety net, they're just the big talking points.

Now, I will agree, the way they're designed doesn't help people in the dead zone between poverty wage and living wage. That's something that does need work, but the fact is, fiscal conservatives have done more to harm this process than help it. The utterly retarded "no new taxes" pledge combined with a refusal for any new regulations creates a self-fulfilling prophecy of an incomplete system.

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Well if inflation rose faster than cost of living people would be better off today than they were in the past.

The cost of healthcare and education has a lot to do with government intervention. We have a bad assorted patchwork of government initiatives that drive up costs. I don't think healthcare should be completely free market but it isn't right now. I would rather see federal programs canned and turned into block grants for states to develop their own systems just like how Canada does but maybe less ambitious. Just to provide a way for low income people to get healthcare. By federal programs I mean things like litigation for malpractice, putting the burden of ER care on hospitals instead of the government, medicare/medicaid underpaying doctors, the government mandating elective care, and allow corporations to write off health insurance benefits on their taxes just links healthcare with employment instead of having it be this personalized thing.
Reagan helped boost an economy that was marked by high inflation and low GDP growth. People were actually getting poorer instead of staying the same. Removing some price controls and lowering the marginal tax rate along with the stable dollar helped turn this around and since then we have had unprecedented economic growth. There is a reason why when he ran in 1984 he won every state except one and his vice president won again in 1988 cementing 3 consecutive Republican presidents. The Democrats had controlled congress like 40 years in a row prior to the 1990s but this strategy allowed the Republicans to become the dominant congressional party. What program exactly was cut under Reagan's term? How would he get something like that through with the congress he had?

My second graph included more social welfare.

Making taxes any higher or burdening the private sector from growing will only make poverty worse. These services need to be redesigned so people can get off of them instead of being dependent on them forever. This doesn't mean I hate poor people or am looking down on people by telling them to pick themselves up by their bootstraps. Just that there are many government initiatives that make people more dependent on these services.

Why do people mistakenly believe that a corporations gaining more profit makes them pay higher wages?

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Here is a tumblr post (GASP SHOCK) http://inkytomes.tumblr.com/post/157...-wage-increase


Here are SOME of the articles it refers to in its analysis of the minimum wage and how it's a myth that $15 minimum wage will destroy small businesses. (Hint, it won't because it's done in increments of a few cents every few months/years)

Look at how it has worked in Vancouver and Seattle and other places!

http://vancouverisland.ctvnews.ca/b-...mber-1.3303369

https://www.businessforafairminimumw...cause-job-loss


http://www.bizjournals.com/seattle/p...ever-came.html

So in short, stop letting wages stagnate because Businesses will literally never raise wages so long as there are starving and desperate people willing to work for low pay.

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You need to link the sources from your charts of the methodology or something so I can look at what information I am looking at.

When I took my economics classes at Purdue our textbook told us most economists oppose the minimum wage.

Majority of Labor Economists Believe Minimum Wage Hikes Cause Unemployment

https://www.epionline.org/minimum-wa...-unemployment/

This is going to really depend though. The minimum wage will cause jobs loss if the mandated wage is above the supply and demand equilibrium. That equilibrium will be impacted by cost of living so the lower the cost of living in an area the more likely the mandated minimum wage will be above that equilibrium. This generally means high cost of living places like Seattle and Vancouver will see less of a negative impact.

For the retail and food industry labor is actually a pretty significant cost and the profit margins are very thin. Something a lot of people seem to be forgetting is that your labor has a value. If that value is below minimum wage than there is no reason to hire you. Not everyone goes to college or vocational school after high school. On the job training is a viable path for them so they can invest in that labor capital to justify higher pay but if you raise the barrier of entry you deny them that opportunity because they will never get hired in the first place.

Minimum wage will also have an impact on the cost of living. You will never be able to maintain a livable wage at minimum wage because you just inflated the cost of living and increased youth unemployment. Cost of living is a factor in how much money you need to survive but it isn't generally counted in poverty ratings. A more productive economy will lower the cost of living by pushing the supply curve up. If a policy increases wages by 20% but cost of living by 30% everyone is actually poorer. The US, especially the Midwest and the South, has a lot lower cost of living than Europe/Canada or the Coastal States.

If you factor in cost of living California actually has the highest rate of poverty in the nation.

Why Does California Have The Nation's Highest Poverty Rate?

It's in the image.

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https://fred.stlouisfed.org/

Doesn't give me your graph.

Those are from 2007, you should look at the current articles.

http://www.epi.org/research/minimum-wage/

http://www.epi.org/publication/emplo...ntional-tests/

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It has a search function.
https://fred.stlouisfed.org/graph/?g=2Xa
https://fred.stlouisfed.org/graph/?g=1Pik

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It looks like it is trying to refute it but it is inconclusive because saying that those jobs were lost because of the recession and not minimum wage increases is conjecture. The minimum wage hasn't even been realized completely yet and the places where it went up already have a higher cost of living than the rest of the country. Job losses there wouldn't be the same as a place with a lower cost of living.


The minimum wage will only have an impact on jobs if it is set above the equilibrium. Right now those wages haven't reached their maximum number and they are being tested in places were that equilibrium would be much higher. This study doesn't contradict that assumption.

If you work retail and made $10 and the minimum wage is $7.25 and the government raises it to $10 you just lost purchasing power because the goods in your local area are going to become more expensive. You were made to start out at the bottom again. People can not forget that money and supply are not the same thing. You are actually providing a service that has a value on it when you work. You aren't going to get paid higher than that value because your contribution to the company would be negative in that case.

It is based off of a percentage of GDP it looks like which doesn't necessarily mean that wages have been dropping. Just that relative to GDP they have. It is measuring income inequality which would mean that the gap between the rich and the poor can go up but in absolute terms the poor can still be richer. You could actually make this measure go up by simply taxing all money made over $100,000 and getting rid of all the rich people but everyone would then be poorer as a result.

The corporate tax is a problem because our tax structure is convoluted. The statutory rate is 35% but the average rate is around 25%. This is because the tax code is so complicated that companies that can take advantage of as many deductions and breaks as they can can pay a lower rate. It sets up incentives that rely more on accounting gimmicks than business practices that boost the economy. It also means that different industries and companies aren't playing on an even playing field and since the government writes the code they are picking the winners and losers. The best solution to this would be to cap all those deductions and lower the statutory rate. It would broaden and streamline the tax base so more corporations would be behaving more economically and paying more taxes. This would be a bigger boon to smaller companies that do not take advantage of all the special breaks that larger ones can.

Might wanna look at those graphs again. Y axes are $bn. Corp profits are after taxes.

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Yeah but it is divided by GDP which gives you a decimal which is why the values are so low. I am not sure why it says billions of dollars but corporate profits would be a lot higher than 0.12 billion dollars.

The after tax is beside the point. When taxes aren't evenly distributed it becomes anti-competitive because a corporation that pays 35% corporate tax can't compete against one that pays 15%.

Corporate profits aren't a bad thing though. They are going to reinvest it in the company for expansion or innovation. I don't know why profits became a dirty word. It is only bad when corporations are only generating profit because they don't have any competition because the government gave them an unfair advantage over other businesses.

I'm not saying they're a bad thing. I'm saying they apparently have either no or a negative effect on wages.

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Well don't we have incomplete information from the two graphs since it is taken over GDP? If corporate profits went up 200% and wages 100% your metric would register that as a decrease in wages when it wouldn't be.

An increase is an increase even if it's a logarithmic scale. That's just not what we're seeing here.

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But it is a ratio so it isn't going to show absolute terms.

Competition should increase wages though in addition to growth in GDP.