Somewhere in my responses to one of these threads I said that I suspected that most support of the Bush cuts was based upon either political concerns or a starve the beast rationale. But probably that was at least a little unfair. One thing that hasn’t been discussed in these threads was the capital gains tax. I suspect that, to the extent that people support the Bush tax cuts on purely economic grounds, the capital gains tax cut is a big part of the reason.

But it’s hard to be sure, because most of the PUBLIC arguments in favor of the Bush taxes cuts (I’m not talking so much about the first one, given that, as I recall, the budget was still in surplus, though even then there were doubts that it would stay that way) were facially pretty weak. I’d love someone here to come right out and say something like this: “look, we realize that most of the Bush tax cuts had a pretty poor rationale from an economic perspective, but on the whole it was worth it to get a cut in the capital gains tax.”

Or is that expecting too much honesty?

Somewhere in my responses to one of these threads I said that I suspected that most support of the Bush cuts was based upon either political concerns or a starve the beast rationale. But probably that was at least a little unfair. One thing that hasn’t been discussed in these threads was the capital gains tax. I suspect that, to the extent that people support the Bush tax cuts on purely economic grounds, the capital gains tax cut is a big part of the reason.

But it’s hard to be sure, because most of the PUBLIC arguments in favor of the Bush taxes cuts (I’m not talking so much about the first one, given that, as I recall, the budget was still in surplus, though even then there were doubts that it would stay that way) were facially pretty weak. I’d love someone here to come right out and say something like this: “look, we realize that most of the Bush tax cuts had a pretty poor rationale from an economic perspective, but on the whole it was worth it to get a cut in the capital gains tax.”

Or is that expecting too much honesty?

But really this seems like a silly thing to focus on (yes, I refer to my own contribution as well, to a certain extent), given that the 1% number comes out of thin air.

My question – and it’s a serious one – are there reputable estimates as to the real average yearly increase to GNP growth during those years would have been with different tax policy? Will asks a similar question, though he says “much lower tax rates,” which is unhelpful for a couple of reasons. I’d like to have answers to two seperate questions: (1) how much additional growth would we have gotten with a more rational (but revenue neutral) tax structure? Rationale in the sense of lower marginal rates and fewer deductions (which is not NECESSARILY more regressive, particularly if you eliminate many deductions). (2) How much additional groth do we get from lowering taxes across the board.

The sense I have – and I’d love to see research to conirm or deny this – is that, tot he extent that we see significant benefits from changes in tax policy, the effect of a more rational tax structure is far greater than the effect of lowering the aggregate rate of taxation. Now, obviously the implications of this aren’t WHOLLY comforting to “liberals,” as it has at least some implications regarding progressivity, but there are ways to smooth out marginal rates somewhat without abandoning progressivity.

But really this seems like a silly thing to focus on (yes, I refer to my own contribution as well, to a certain extent), given that the 1% number comes out of thin air.

My question – and it’s a serious one – are there reputable estimates as to the real average yearly increase to GNP growth during those years would have been with different tax policy? Will asks a similar question, though he says “much lower tax rates,” which is unhelpful for a couple of reasons. I’d like to have answers to two seperate questions: (1) how much additional growth would we have gotten with a more rational (but revenue neutral) tax structure? Rationale in the sense of lower marginal rates and fewer deductions (which is not NECESSARILY more regressive, particularly if you eliminate many deductions). (2) How much additional groth do we get from lowering taxes across the board.

The sense I have – and I’d love to see research to conirm or deny this – is that, tot he extent that we see significant benefits from changes in tax policy, the effect of a more rational tax structure is far greater than the effect of lowering the aggregate rate of taxation. Now, obviously the implications of this aren’t WHOLLY comforting to “liberals,” as it has at least some implications regarding progressivity, but there are ways to smooth out marginal rates somewhat without abandoning progressivity.

I, like Larry and others, found the twice-as-much-growth thing confusing. I also reached the same conclusion as Sigivald independently, without reading the comments. I think both sides are right: it is confusing, but not such nonsense that one can’t figure it out after “wha?”

I think the “close to the difference between GDP per capita tripling rather than doubling over that time span” looks correct. I don’t know what compound interest calculator LarryM refers to; I will try to calculate it from first principles. It’s a 36-year period. Raising 1.01 to the 36th power gives 1.43. One of the things that number means is that if the GDP of country X starts equal to country Y, then grows 1% proportionally faster per year for 36 years, afterwards the GDP of X will have grown to 1.43 times the GDP of Y; we could say it has grown to 43% larger. Now if country X is the United States of Imagination with some policy which lets it grow 1% faster, and country Y is the United States of real-world America what happens? USA1973 has grown to 2.00 times the GDP of USA1947; ISA1973 has grown to 2.00*1.43=2.86 times the GDP of USA1947.

If by some happy miracle my publicly posted calculation doesn’t contain a stupid error, then “almost 3″ seems like a fair paraphrase of 2.86; given that the answer depends on a rate of 1%-for-the-sake-of-argument, rounding to 1 digit of accuracy seems more reasonable than reporting “about 2.9″ or “about 2.86″.

I, like Larry and others, found the twice-as-much-growth thing confusing. I also reached the same conclusion as Sigivald independently, without reading the comments. I think both sides are right: it is confusing, but not such nonsense that one can’t figure it out after “wha?”

I think the “close to the difference between GDP per capita tripling rather than doubling over that time span” looks correct. I don’t know what compound interest calculator LarryM refers to; I will try to calculate it from first principles. It’s a 36-year period. Raising 1.01 to the 36th power gives 1.43. One of the things that number means is that if the GDP of country X starts equal to country Y, then grows 1% proportionally faster per year for 36 years, afterwards the GDP of X will have grown to 1.43 times the GDP of Y; we could say it has grown to 43% larger. Now if country X is the United States of Imagination with some policy which lets it grow 1% faster, and country Y is the United States of real-world America what happens? USA1973 has grown to 2.00 times the GDP of USA1947; ISA1973 has grown to 2.00*1.43=2.86 times the GDP of USA1947.

If by some happy miracle my publicly posted calculation doesn’t contain a stupid error, then “almost 3″ seems like a fair paraphrase of 2.86; given that the answer depends on a rate of 1%-for-the-sake-of-argument, rounding to 1 digit of accuracy seems more reasonable than reporting “about 2.9″ or “about 2.86″.

I happen to think that its problematic even when my “side” uses sarcasm this way (though given the direction that my political views are going, my “side” is pretty darn small). There are plenty of conservatives and libertarians who write cogently on tax policy (see, e.g., Bruce Bartlett, even when he isn’t criticizing the Bush administration) that I read with real interest. My take on Will in this case is that, right or wrong (and in the larger sense I do think that SOME of Chait’s claims go too far, and there is certainly an argument that but for the Republican tax cut revolution, excesses and all, we would be in a worse place today in terms of tax policy), is that he is a smart guy with s superficial understanding of economics who has cherry picked those sources which are most congenial to his political and philosophical views.

Now, that’s a pretty darn common phenomenon, and you certainly could accuse Chait of it as well. In a sense, the fact that I’m going on about it at such length is a sign of respect for Will. I expect better from him.

I happen to think that its problematic even when my “side” uses sarcasm this way (though given the direction that my political views are going, my “side” is pretty darn small). There are plenty of conservatives and libertarians who write cogently on tax policy (see, e.g., Bruce Bartlett, even when he isn’t criticizing the Bush administration) that I read with real interest. My take on Will in this case is that, right or wrong (and in the larger sense I do think that SOME of Chait’s claims go too far, and there is certainly an argument that but for the Republican tax cut revolution, excesses and all, we would be in a worse place today in terms of tax policy), is that he is a smart guy with s superficial understanding of economics who has cherry picked those sources which are most congenial to his political and philosophical views.

Now, that’s a pretty darn common phenomenon, and you certainly could accuse Chait of it as well. In a sense, the fact that I’m going on about it at such length is a sign of respect for Will. I expect better from him.

I like Will’s sarcasm.

Regardless of the specific hard-to-come-by numbers, I think that the point that Chait seems biased to underestimate the effects of high tax rates is a perfectly valid one.