Live! The Economic Effects of Raising Income Taxes on Upper-Income Taxpayers, with Chye-Ching Huang

May 8th, 2012 at 4:44 pm

I tout this important new paper by CBPP’s tax policy analyst CC Huang every chance I get.  As if that’s not enough, here she is herself, talking with me about the key findings.  Check it out.

Coming next, the musical version!

H/t, as always, to CW for production work.

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2 comments in reply to "Live! The Economic Effects of Raising Income Taxes on Upper-Income Taxpayers, with Chye-Ching Huang"

  1. perplexed says:

    While I originally thought this was a finding of some unknown (at least to me) economist, I was surprised to find what is likely to be the source of this destructive meme while reading Nicholas Wapshott’s book on Keynes and Hayek. As Wapshott tells it (p253):

    “On top of this life lesson, on reaching Hollywood Reagan learned another, that progressive taxation provided a disincentive to work. As an actor earning over $5 million a year, he was taxed a stinging 79 percent on his income in 1937, rising to 94 percent in 1943. ‘I know what I did,’ he explained ‘I would be offered scripts of additional pictures and, once I had reached that bracket, I just turned’em down. I wasn’t going to go to work for six cents on the dollar.’ ”

    So our “highly productive” “job creators” really turn out to be “B” movie actors making $5 million at the height of the Great Depression and during the 2nd World War that were going to quit working when they hit the higher marginal rate because they wouldn’t be able to keep enough of the extra income. I guess he never contemplated the fact that another “B” movie actor who was currently unemployed at the time could have made the movie and paid a much lower rate if Reagan had chosen not to make it; only real “job creators” can do this kind of stuff, you know. So the real problem he was trying to solve was not one of productivity, it was that those with a choice and access to these enormous payouts were unable to keep enough for themselves. Maybe when Disney began personifying deer and other small forest animals it should have been a clue to us that we should be a little more careful about the intellectual strides we were likely to make from Hollywood entertainers. So I wonder how much revenue we have foregone since this fantasy has been implemented and how many childrens’ educations and subsequent opportunities (not to mention other other worthwhile public investments) have been cut short by the resulting lack of funding since then. Chalk it up to the cost of entertainment I guess.

    Thanks to Chye-Ching Huang, et. al. for finally blowing a hole in this destructive myth; too bad she couldn’t have been born 35 or 40 years earlier and been able to have shot it down before it really took hold and did so much damage.

  2. Misaki says:

    Q59. Which do you think is the best way to promote economic growth in the U.S.? 1.Lower taxes on individuals and businesses, and pay for those tax cuts by spending on some government services and programs, or 2. Spend more on education and the nation’s infrastructure, and raise taxes on wealthy individuals and businesses to pay for that spending.
    Lower taxes, cut spending 37
    Spend more raise taxes 56

    Just as with the idea of corporate profits creating jobs, the true issue is not effectiveness, but ‘socialism’.

    It seems part of it is the reluctance of people to admit that if Ronald Reagan turns down a role or earn less money, it gives someone else the opportunity to do that work instead.