Comments on: Small Responders vs. Big Ones

By: Master Jared Bernstein: Tax Cuts and Job Growth: They’re Just Not That Into Each Other

Wed, 02 May 2012 14:00:52 +0000

[...] That doesn’t mean measures like the payroll tax holiday are useless. For one, by increasing the after-tax wage, they put more money in people’s pockets, and that in-and-of-itself creates more demand. Also, when the economy turns up and demand begins to come back, a cut in the tax wedge can give cautious employers a nudge to pull some future hires forward into the present. Master But as Bartlett shows, there’s no correlation between the tax wedge and employment rates across countries. The figure shows the scatterplot. There’s a slope there but it’s nowhere close to significant and the R-square is 0.005, meaning there’s no cross-country correlation between the magnitude of the tax wedge and the employment rate. A better test would be changes across time, and such panel data analyses find a bit more than the cross-sectional view. But not much. Here again, small responders win. [...]

By: marcel

marcel — Thu, 19 Apr 2012 14:33:51 +0000

But, but, but…THE SKY IS FALLING!

Rather than big vs. small responders, you might put this as a contrast between Chicken Little on the one hand and … hmmm, I cannot figure out who told CL to chill. Maybe D. McCloskey

(If the link gets trashed when I post it, I linked McCloskey’s name to this: http://www.deirdremccloskey.com/docs/pdf/Article_179.pdf)

By: Tyler

Tyler — Thu, 19 Apr 2012 12:41:34 +0000

Tax increases reduce the deficit, which is exactly what we should not be doing right now.

“In short, those who want to cut the deficit now are lobbying for fewer jobs and higher unemployment.” – Dean Baker

“Look after the unemployment, and the budget will look after itself.” – John Maynard Keynes, in a radio interview in 1933 (Reference: Collected Writings of John Maynard Keynes, Volume XXI, page 150)

By: NP

NP — Thu, 19 Apr 2012 06:50:59 +0000

I think Gravelle’s conclusion is wrong because there is a lot that needs to be changed about the tax code. For one, the rates on high income earners needs to be raised significantly – you have talked about this a lot. This is a small responder conclusion, i.e. taxing the rich more will generate significantly more revenues (and have great societal benefits) but not really change their behavior that much – in terms of hiding income etc. (anymore than they are already doing).

By: Brad

Brad — Thu, 19 Apr 2012 04:06:23 +0000

I’ve read various arguments from a progressive perspective for eliminating corporate taxes entirely and making up the revenue with tax increases in other areas. Would love to hear your thoughts on this.

By: Daniel Kuehn

Daniel Kuehn — Thu, 19 Apr 2012 03:20:44 +0000

I agree very strongly, and I worked out some of the reasons why people make this mistake here: http://factsandotherstubbornthings.blogspot.com/2012/04/jared-bernstein-on-taxes.html