Horribly crunched with travel and testimony—more to come on both—but wanted to point out a few things.
First, this: France plans to introduce a small tax on financial transactions, an FTT of 0.1%. One argument as to why we might not want to do this is that traders will flee to exchanges without the tax. Well, this chips away at this argument and Germany has made similar noises about adopting the measure.
Probably not de rigueur to cite Sarko, but I agree: “There’s no reason why deregulated finance, which brought us to the current situation, can’t participate in the restoration of our accounts.”
I offer another rationale for the tax at the end of this piece.
Second, there were a few revealing moments, I thought, in this radio debate we had this AM on (the great) Diane Rehm’s show. I was debating WSJ editorial writer Steve Moore on supply-side-trickle-down, and numerous times, he argued that supply-side tax cuts put more money in the hands of wealthy people and that generates more government revenue—this is Laffer curve stuff—and that this is what supply side is all about.
But as I tried to stress whenever that came up…no, it really isn’t just that. I’m perfectly willing to grant that tax cuts for rich people make them richer, and while there’s no Laffer curve—the cuts don’t come anywhere close to paying for themselves—Steve’s right that their extra income will generate tax revenue.
But what doesn’t happen next is what matters: it doesn’t trickle down. I know this is simple but it must be repeated. The point of supply-side tax cuts is not to raise the after tax income of the wealthy, and then go home. The legend is that their wealth will create more growth and jobs for the rest of us.
And that’s the part that doesn’t work.
Dear Jared,
In France the justification goes: the taxes on the stock exchange transactions were removed, so now they come back under the name Transaction tax… the French feel that is reïnstating the previously removed tax.
So its no big deal!
Just listened to the show Jared; thanks for providing the link. I have a couple of questions and one observation:
Why do all of these foolish multimillionaires and billionaires continue to pay these exorbitant corporate taxes when they could simply choose another form of organization that would not be subject to these awful taxes? Maybe their tax advisers don’t know there are options that would not be subject to these taxes; you know, like Romney’s advisers do.
Why wasn’t Dean Baker at this discussion; especially with regard to the “competition with China issues?” Someone needs to preface all of these discussions with facts about how little effect tax policies have relative to government intervention in the pre-tax distribution of wealth or we just become accomplices in the Republican obfuscation of the real issues and any attempt at real solutions.
As far as the nexus between low capital gains rates and growth, its getting very annoying hearing the roosters continuing to try and take credit for the sun coming up in the morning!
BTW, nice job exposing the gaping holes in supply side trickle down!
It is clear that a person in power can believe anything that they want, factual or not, as long as they can convince enough people that they are right. The supply-side proponents cling to their beliefs because it benefits them. They are not really concerned about trickle-down, since they are the ones who have amassed the largest wealth.
Certainly we will not be able to convince those who are benefiting from supply-side thinking to change their viewpoint and consider the alternatives. Truly the only real possibility is to get the vote out.
At the end of the program the Simpson Bowles model was mentioned a couple of times as a possible bi-partisan solution to the budget. I wish someone would have reminded the listeners that no plan came out of that commission.
Their mandate was to create a plan that was to be agreed to by 14 of the 18 committee members. This never happened. In the end Mr. Simpson and Mr. Bowles prepared a report but it was never approved by the committee.
Other than that, it was a good program (as her shows typically are).
If supply-side actually did work, its proponents would work hard to find something that didn’t. The point is to redistribute income away from people who work for a living toward people who don’t have to.