The Experts Weigh In
Posted by Godefroi on October 13, 2008
Somehow, the current economic situation is leading to a huge gain in the polls for Senator Obama. I don’t understand why, but it appears that most polled voters believe that his economic plan will benefit the U.S. more so than will that of Senator McCain.
I’m not an economist. I have only one quick comment on this: Things really started going to hell in a handbasket in the last couple of years. When did the Democrats take control of Congress? Right.
Since I’m not an expert, I consulted with some. Well, not really, but I did find some expert perspective here. A few highlights are in order.
Hundreds of economists (including Nobel Prize winners Gary Becker, James Buchanan, Robert Mundell, Edward Prescott, and Vernon Smith) have signed letters opposing Barack Obama’s economic and tax plans (here, here, and here):
I won’t steal Mr. Caron’s thunder by pasting the rest. I will, however, note one of the comments.
Well, Shag, as one of the signers of that statement I will tell you what nearly every professional economist would tell you about tax policy.
First, businesses are not the ultimate payers of taxes–the taxes collected from them come out of the pockets of actual people. The only interesting tax questions are, which people should pay taxes and on what basis should those taxes be assessed? Barack Obama thinks that owners of shares of stock–and ultimately all other savers–should pay more taxes regardless of whether those owners are very high-income earners or not. Economists who’ve studied this issue closely have concluded that this tax strategy serves in the long run mostly to reduce the amount of capital provided to workers, thereby reducing their wages. The general consensus is that it makes more sense to tax people on the basis of their consumption rather than their income; Bush’s tax cuts were a step in that direction. Consumption taxes can be made to be progressive, and that would not be opposed by a huge majority of economists, but the more progressive those taxes are made to be the more incentives the well-to-do have to avoid those taxes.
This leads me to another principal criticism of Obama’s tax plan: such a dramatic increase in the top marginal tax rates would certainly revive the tax-shelter industry. While this may be welcome news to the Tax Prof and his students, it is bad news for economic activity and the fairness of the tax code.
Finally, Obama’s claim that he’s going to reduce the taxes paid by 95% of Americans is preposterous on its face. About half of U.S. households pay no income taxes already. That’s not even “fuzzy math,” that’s just plain lying.
Oh, and by the way, I–and most academic economists–earn far less than $250,000 per year. Is it so very difficult for you to comprehend the idea that we just might be speaking out on the basis of objective analysis? If so, that speaks volumes about the basis for your own views.
One additional point to consider that’s related to Wildmonk’s first observation: I’ve had a couple of friends give me the what-for about McCain “rewarding companies that send their jobs overseas” with tax breaks. First of all, we consumers end up fielding these taxes, as stated above. Second, there’s no special plan to specifically give financial benefits to companies that ship labor overseas…it’s an incidental advantage, at best. Finally, if an Obama administration follows the logical path of punishing “excessive” profits and tax loopholes/benefits that such corporations currently enjoy, there’s nothing stopping those companies from moving their entire base of operations offshore, if the tax situation shows it to be a profitable move. Then the revenue stream essentially stops…so the federal government has to get more revenue, and where do you think THAT money would come from?