John Galt Speaks

Greg Mankiw does the math on going Galt in today’s NYT, and decides that higher taxes will lead him to deny us some of his labor.

Maybe you are looking forward to a particular actor’s next movie or a particular novelist’s next book. Perhaps you wish that your favorite singer would have a concert near where you live. Or, someday, you may need treatment from a highly trained surgeon, or your child may need braces from the local orthodontist. Like me, these individuals respond to incentives. (Indeed, some studies report that high-income taxpayers are particularly responsive to taxes.) As they face higher tax rates, their services will be in shorter supply.

In order to make a compelling case for the dire impact of paying a couple more percent in taxes, he has to haul out this chestnut:

And that saving no longer earns 8 percent. First, the corporation in which I have invested pays a 35 percent corporate tax on its earnings. So I get only 5.2 percent in dividends and capital gains. Then, on that income, I pay taxes at the federal and state level. As a result, I earn about 4 percent after taxes, and the $523 in saving grows to $1,700 after 30 years.

If a company is actually paying 35% in tax, then they’re run by idiots and Mankiw shouldn’t expect to get a 5.2% yield — he should expect to lose his investment.

The rest of the article includes a bunch of other questionable assumptions. For example, I doubt that someone contemplating whether or not they want to earn $1000 for cranking out an essay will think about the 30 year yield of investing that money, as well as the impact of estate tax. But Mankiw can only make it look like he’s taken a serious hit from taxation if he makes those kinds of assumptions.

If higher taxes will keep Mankiw from cranking out crap like this, let’s raise his taxes to the Eisenhower rate of 91%.

Update:

Share On Facebook
Share On Twitter
Share On Google Plus
Share On Pinterest
Share On Reddit






118 replies
  1. 1
    Redshirt says:

    Can we have dog in a bucket? That best expresses the Galtian ethos, IMO!

  2. 2
    Phyllis says:

    If you’re in it for the money, you’re in it for the wrong reason. And a surgeon that’s in it for the money is the worst kind of ‘healer’.

    And btw, what was the tax rate when Ayn Rand was a top-seller? Didn’t seem to deter her from continuing to write and publish. Unfortunately.

  3. 3
    numbskull says:

    Mankiw is the idiot who, under Bush, listed McDonald’s line work as a manufacturing position.

    So yeah, I really give a fuck what the asshole has to say. not.

  4. 4
    gene108 says:

    I don’t get the higher tax discourages working more for more money argument.

    Are people really willing to forgo earning an extra $1,000 in income because they’d pay $250 in taxes on it and only have a net of $750 dollars?

    I have yet to meet anyone, who really says, no I’m not going to earn extra money because I’d pay more in taxes. $750 dollars is still $750 dollars more than I’d have, by not doing the extra work, getting promotion, etc.

  5. 5
    different church-lady says:

    -head desk-

    -head desk head desk head desk head desk head desk HEAD DESK-

  6. 6
    beltane says:

    What these Randians really lack is an old-fashioned work ethic. My grandmother used to tell me, “If a job is worth doing, it’s worth doing right.” Mankiw’s grandmother must have told him “Don’t bother dragging your fat ass out of bed in the morning unless they pay you good for it.”

  7. 7
    Chyron HR says:

    Like me, these individuals respond to incentives.

    “On the other hand, you sub-Epsilons are too stupid to recognize an incentive when you see it, so let’s cut the minimum wage to make you work harder.”

  8. 8
    different church-lady says:

    I can’t edit my own comment so it’s not strike-thru.

    I am not familiar with all internet traditions.

  9. 9
    caune says:

    OK so work less Greg….because that will free up more work for others who have actual functioning brains. It’s a win win ;)

  10. 10
    different church-lady says:

    @beltane:

    Mankiw’s grandmother must have told him “Don’t bother dragging your fat ass out of bed in the morning unless they pay you good for it.”

    When your only tool is a weak argument, every problem looks like an op-ed in the NYTs.

  11. 11
    JPL says:

    The NYTimes today also too writes about Ann Coulters antics. She’s on the cover of the style section. There is a full page and a half dedicated to Atlas Shrugs. What a waste of paper.

  12. 12
    Karmakin says:

    The whole idea is really fucking stupid anyway. If we’re not talking about punitive taxes, meaning like 50+ or something like that, the idea that it’s going to make people “Go Galt” is stupid.

    In fact, the concern is really the opposite. Too much money can lead to people acting in very short-term ways. It really can be a moral hazard issue.

    Although I have to say, I HAVE seen people not work overtime, for example, because working the additional hours, and depending on how their company does withholdings can result in not that much benefit on the weekly paycheck. Usually in this case, the extra money will be gotten back at tax time, but for someone living paycheck to paycheck, that’s not really a consideration. But again, this doesn’t have much to do with taxes itself.

  13. 13
    Jamie says:

    True, most eonomists do very little to merit a salary that puts them in the top tax bracket.

  14. 14
    El Cid says:

    Mankiw’s doing the same propaganda shit you hear on right wing radio.

    If a company is actually paying 35% in tax, then they’re run by idiots and Mankiw shouldn’t expect to get a 5.2% yield—he should expect to lose his investment.

    He cites the corporate tax rate and would likely get angry if anyone brought up the actual tax rates collected after all deductions etc.

  15. 15
    Menzies says:

    @numbskull:

    Among other equally stupid things. Luckily his textbook for principles of economics wasn’t as absolutely irredeemable a read as I’d been expecting from his public statements.

  16. 16
    Suck It Up! says:

    @gene108:

    I have yet to meet anyone, who really says, no I’m not going to earn extra money because I’d pay more in taxes. $750 dollars is still $750 dollars more than I’d have, by not doing the extra work, getting promotion, etc.

    I have. Plenty of times. I used to work in retail and overtime was time and a half. I jumped at the offer, there were co-workers who would turn it down because they didn’t want to pay more taxes. I never understood it. Never argued with them either, just took the extra hours they passed up.

  17. 17
    beltane says:

    @Chyron HR: Yes, if those workers who actually produce goods and services-as opposed to those who are paid for their beautiful thoughts-were reduced to starvation wages, they will become a productive little army of worker ants whose only joy is to see their employers accumulate wealth at their expense.

    The glibertarians expect an awful lot of altruism on the part of the lesser classes, don’t they. “Greed for me, selflessness for thee” should be their motto.

  18. 18
    Ahasuerus says:

    Ad Hominem deleted

  19. 19
    Allan says:

    How high must we raise taxes to drive Mankiw into retirement? Inquiring minds want to know.

  20. 20
    different church-lady says:

    @Suck It Up!:

    Plenty of times. I used to work in retail and overtime was time and a half. I jumped at the offer, there were co-workers who would turn it down because they didn’t want to pay more taxes.

    That’s a really good way of keeping stupid people out of the workforce.

    Hey, why don’t I get to write NYT op-eds?

  21. 21
    Caren says:

    Money is not the best nor the only motivator.

    Mihaly Csikszentmihalyi. Flow.

    Much better and provable work/production relationship.

  22. 22
    El Cid says:

    I continue to be confused at modern ‘journalism’. This from a good (not great) editorial in the New York Times against the proposal that the US can assassinate any noncombatant anywhere without charge or trial.

    The drone program has been effective, killing more than 400 Al Qaeda militants this year alone, according to American officials, but fewer than 10 noncombatants.

    I wonder if anyone writing that stops to think that a good number of readers and maybe a few journalists would want to see some sort of attempt at verifying such government claims? I mean, the government says they’ve killed X militants with Y noncombatants, and the billion dollar media just say ‘OK’, as long as they follow it with “according to American officials”?

  23. 23

    Can Balloon Juice go galt from that fucking Bing ad at the bottom of the page? Seriously, that is driving me insane in Chrome. Another step closer to the Ad Block.

  24. 24
    windshouter says:

    Don’t you remember the shortage of skilled labor in the 1990’s? It was a real scandal in baseball, for instance, that no one would put out extra effort on the field, because the tax rates were so high. I remember the horror of trying to get investors and companies interested in the internet and web at the time, but no one would invest because of the tax rates.

    Now, the 2000’s, that’s when everyone started investing in stuff that made the economy grow.

  25. 25

    @different church-lady:

    When your only tool is a weak argument, every problem looks like an op-ed in the NYTs.

    That is so full of win. I’m stealing it.

  26. 26
    burnspbesq says:

    mistermix:

    If a company is actually paying 35% in tax, then they’re run by idiots and Mankiw shouldn’t expect to get a 5.2% yield—he should expect to lose his investment.

    Wrong again. Read a random sample of 10-Ks, and it’s likely that a third of the reporting companies will report worldwide effective tax rates of 35 percent or more. First, there is the effect of state and local income taxes. Second, there are some industries – retail and apparel manufacturing come to mind – where the opportunities to defer US taxation of non-US-source income, or to shift income from the US to other jurisdictions, are relatively limited.

    You should really make more of an effort to know what you’re talking about.

  27. 27
    r€nato says:

    @gene108:

    Are people really willing to forgo earning an extra $1,000 in income because they’d pay $250 in taxes on it and only have a net of $750 dollars?

    I’ve actually known a couple of people who had this exact attitude. “OMG if I make more money, I’ll have to pay more in taxes!”

    Of course, both were in the fortunate position of being able to rely on a spouse’s income to pay the bills and earn the big money.

  28. 28
    fucen tarmal says:

    @Suck It Up!:
    same assholes who undoubtedly look forward to the day they get their tax return as if it was christmas for adults.

    i knew a fair bunch of those when i worked a union job in my post-college mid 20s, kind of idiots who would talk about how they would never live in the city because of how high the taxes were, and then be upset that i didn’t want to participate in, attend or hear about their volunteer fire department fund raiser…between that, and gas, car maintenance the “need” for a newer car, with seat warmers and like crap every three years or so, yeah those high taxes are killing me…ow….

  29. 29
    Odie Hugh Manatee says:

    The answer to higher taxes is for them to make less or even nothing at all? To do less that requires taxing? Do these people think they are in some union where they will walk out in lockstep to protest unfair conditions and someone is going to listen to them? Really, who is going to give a shit if Mankiw or his type quit working? Is there a negative side to this situation he feels he is facing?

    If he has money invested in a company that pays 35% in taxes then he is either an idiot or a liar.

    Ok, he’s an idiotic liar.

  30. 30
    r€nato says:

    @burnspbesq: Mankiw is talking about the US corporate tax rate, not considering the numerous deductions and credits most corporations use which reduce the effective US corporate tax rate.

    You’re talking about worldwide effective tax rate, including state and local taxes.

    My sperm donor – who loathes every single tax, even the ones that pay for the public roads he drives on – loved to bitch about how he paid over half his income in taxes. He arrived at this number by simply adding up the percentages of the income tax rate (he didn’t even factor in that the top rate was not applied to the first $X thousand of income, nor the numerous deductions he used and abused), sales tax rate (as if he spent all of his income on taxable items), property tax rate, etc.

    Anyone who tried to point out to him (an engineer, no less, who ought to be much better at math) the obvious fallacy of this sort of calculation, got a very nasty ‘drop dead, asshole’ look from him.

  31. 31
    R. Porrofatto says:

    The punch line:

    N. Gregory Mankiw is a professor of economics at Harvard. He was an adviser to President George W. Bush.

    You’d think that being the economics advisor to an administration that presided over the worst economic catastrophe since the Great Depression — one that we may never recover from — would be enough right there to laugh him off of the op-ed pages. But there he is, right along with Mad Pam Geller. Thank you, New York Times!

  32. 32
    Mike in NC says:

    When he wrote this:

    high-income taxpayers are particularly responsive to taxes

    I read “high-income taxpayers are particularly responsive to loopholes, shelters, and other methods to avoid paying taxes in the first place”

  33. 33
    Odie Hugh Manatee says:

    @arguingwithsignposts:

    SeaMonkey, NoScript and FlashBlock. That’s all you need for a fast and clean browser that keeps the crap out.

    Fuck Google and fuck Chrome.

  34. 34
    beltane says:

    @Mike in NC: They’re also particularly responsive to tax rates because they already have more money than they can spend and so have nothing else to worry about.

  35. 35
    beltane says:

    I’m starting to really love Barry Ritzholtz’s site: http://www.ritholtz.com/blog/2.....t-defense/ He’s a good guy who’s getting more angry by the day. Whenever Greg Mankiw finally goes Galt, Ritzholtz should be the one to fill the void.

  36. 36
    JPL says:

    @arguingwithsignposts: The same thing happens on Firefox.

  37. 37
    John S. says:

    @burnspbesq:

    Maybe you should take your own advice and know what the fuck you’re talking about. According to an August 2008 report by the GAO:

    the average U.S. effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2 percent

    The report went on to note that “statutory tax rates do not provide a complete measure of the burden that a tax system imposes on business income because many other aspects of the system, such as exemptions, deferrals, tax credits, and other forms of incentives, also determine the amount of tax a business ultimately pays on its income.”

    In June 2007, the Treasury Department concluded:

    If the revenue from tax preferences were used to lower the corporate tax rate, the rate could be lowered from 35 percent to 27 percent while producing approximately the same revenue.

    How does that foot of yours taste?

  38. 38
    d0n camillo says:

    Greg Mankiw, Megan McArdle and Ann Coulter, will you go fucking Galt already? Go ahead and withhold your productivity. I’m willing to take my chances.

  39. 39
    azlib says:

    Reminds me of my brother whose company was bought out and he and his colleagues fortunate enough to have stock had to pay a 35% short term capital gains tax. Some of his colleagues whined about the taxes. My brother’s response was to say he would take their buyout money and pay their taxes. He got no takers.

    Mankiw is a shill for the selfish rich. It is that simple.

  40. 40
    david1234 says:

    If Mankiw’s taxes were raised, the money he has to live on would go down. He claims that he would react to this loss of income by working less and having an even smaller income. Somehow I doubt that is what he would do.

  41. 41
    John S. says:

    @r€nato:

    It sucks having a wingnut for a father sperm donor. My condolences. But at least HE isn’t getting paid big bucks to pollute the NYT with his gibberish like Mankiw is.

  42. 42
    That's Master of Accountancy to You, Pal (JMN) says:

    @John S.:

    Maybe you should take your own advice and know what the fuck you’re talking about. According to an August 2008 report by the GAO:

    Try reading what he wrote. He didn’t say all corporations pay 35%. He said about a third of them pay that or higher. This is in no way inconsistent with what you wrote.

    Basic math is your friend.

  43. 43
    r€nato says:

    @That’s Master of Accountancy to You, Pal (JMN): what burns actually wrote:

    a third of the reporting companies will report worldwide effective tax rates of 35 percent or more.

    what Mankiw actually wrote:

    First, the corporation in which I have invested pays a 35 percent corporate tax on its earnings.

    ‘worldwide effective tax rate’ != nominal US corporate tax rate.

  44. 44
    Ron says:

    It’s amazing how little the supposed experts understand the mathematics of taxes. I have a friend who claims his sister had to turn down some promotion or something like that because after taxes, it would have cost her money. People really believe that this will happen to them.

  45. 45
    Comrade Darkness says:

    The highest concentration of good doctors in the u.s. with the best outcomes are at the Mayo clinic. Where they make LESS than average, on salary.

    Mankiw is just a tool. But we knew that.

  46. 46
    El Cid says:

    I know this will be a complete shock, but Tea Party groups and anti-Muslim / anti-Arab crazies and new media star Pamela Geller continue to develop ties with European white supremacist anti-immigrant anti-Muslim thug groups.

    The English Defence League, a far-right grouping aimed at combating the “Islamification” of British cities, has developed strong links with the American Tea Party movement.
    __
    An Observer investigation has established that the EDL has made contact with anti-jihad groups within the Tea Party organisation and has invited a senior US rabbi and Tea Party activist to London this month. Rabbi Nachum Shifren, a regular speaker at Tea Party conventions, will speak about Sharia law and also discuss funding issues.
    __
    The league has also developed links with Pamela Geller, who was influential in the protests against plans to build an Islamic cultural centre near Ground Zero. Geller, darling of the Tea Party’s growing anti-Islamic wing, is advocating an alliance with the EDL. The executive director of the Stop Islamisation of America organisation, she recently met EDL leaders in New York and has defended the group’s actions, despite a recent violent march in Bradford.
    __
    Geller, who denies being anti-Muslim, said in one of her blogs: “I share the EDL’s goals… We need to encourage rational, reasonable groups that oppose the Islamisation of the west.”
    __
    Devin Burghart, vice-president of the Kansas-based Institute for Research & Education on Human Rights, said: “Geller is acting as the bridge between the EDL and the Tea Party. She plays an important role in bringing Islamophobia into the Tea Party. Her stature has increased substantially inside the Tea Party ranks after the Ground Zero mosque controversy. She has gained a lot of credibility with that stuff.”

    This means of course that the real racists are the libruls.

    The Tea Parties anti-Muzzie brigades can also unite in a similar struggle as their US compatriots launch harassment of Campbell’s Soups:

    Last week, 40 EDL followers protested for three days outside a KFC restaurant in Blackburn which was trialling halal meat. A fortnight before, 30 EDL followers in Gateshead held an impromptu demonstration outside a police station after six of their friends were arrested for burning the Qur’an; a similar number attacked a leftwing meeting in Newcastle. On the anniversary of 9/11, there were EDL actions in London, Nuneaton, Leeds and Oldham.

  47. 47
    Atlantian says:

    In my experience, this is completely untrue. I lived in Italy for the past 5 years and in December of 2009 had to have emergency heart surgery. My surgeon was the chair of cardiac surgery at the Ospedale Cattinara in Trieste, one of the 3 major heart centers in Italy. Do a Google search on him and you’ll get pages of recommendations and citations. His salary is set by the state and his tax rate is the same as everyone else’s, i.e. high. He and his team perform some 15 open heart surgeries a week, not counting the emergencies that arrive daily. The patients are rich and poor, old and young, in good health and near death. I have never met a better, kinder, more professional group of people in my life and I’ve lived all over the world.

    I guess this is the difference between practicing your art out of genuine compassion for people and pride in your profession rather than being a shill for big pharm while keeping one eye on the balance sheet. I’m back in the US now and can’t afford insurance. It would actually be cheaper to fly back to Italy every two months for check-ups. Regardless, the care here is mediocre and when that bill hits the mailbox, the one that says in big block letters at the top, “UNINSURED – SELF PAY”, the telephone calls start demanding payment.

    Mr. Mankiw should probably get out more.

  48. 48
    Xboxershorts says:

    @r€nato:

    First, the corporation in which I have invested pays a 35 percent corporate tax on its earnings.

    Mankiw has reserve cash to investing in corporations. And it pisses him off that his choice of corporate investment is taxed at the nominal rate of 35% before tax incentives thus limiting his return on investment?

    I’m still limited to investing in food, and let me tell you, the returns are VERY shitty.

  49. 49
    liberal says:

    Mankiw is a habitual liar.

  50. 50
    jg says:

    I wonder how Mankiw can reconcile the fact that he’s unwilling to write an article for $1000 with the the fact that his entire academic career is built upon submitting articles FOR FREE to academic journals?

  51. 51
    Jeffrey Boser says:

    He claims to get 4% return on investment after taxes? He is getting far higher returns than that.

    Also, the estate tax only kicks in after the first million, even after it goes back up.

    And on top of that, there are far more efficient ways of transfering wealth to your family than your will.

    Life of leisure? When he dies his heirs will become flat out millionaires after taxes, far more unearned income than most people work their whole lives for.

  52. 52
    jg says:

    I wonder how Mankiw can reconcile the fact that he’s unwilling to write an article for $1000 with the the fact that his entire academic career is built upon submitting articles FOR FREE to academic journals?

  53. 53
    schrodinger's cat says:

    Oh noes goggie is going Galt in lolrus’s bukkit!

  54. 54
    beltane says:

    @El Cid: Fascists of a feather flock together. Since at least the 1930’s the American right has hated all things European with the exception of their fascists, Nazis, and neo-Nazis.

  55. 55
    schrodinger's cat says:

    The only way this photo could be improved upon is by putting Tunch in the bukkit and taking his photo. We can has Tunch plz?

  56. 56
    MikeBoyScout says:

    First, Mankiw missed the obvious solutions:

    1: Stop building train tunnels

    2: Let homes burn to the ground unless the owner has paid their fire fighting fees

    The nice thing about K-thugs abbreviation for Very Serious People is that we all know the “S” really stands for stupid.

  57. 57
    burnspbesq says:

    @John S.:

    It’ll taste even better after I pull it out of your ass.

    Your data set is not my data set. If you had a shred of intellectual honesty, you wouldn’t play that bullshit game.

    Fuck you.

  58. 58
    El Cid says:

    @beltane: The people like you who call the TeaTards and anti-Muzzie-and-Arabs activists as racist and fascist are the real racists and fascists and this was proven in the great scholarly study by Jonah Goldberg.

  59. 59

    In unrelated environmental news, maybe we could ask the red sludge from Hungary to go galt? AP: Officials: Wall of Hungary sludge lake will fall.

  60. 60
    Basilisc says:

    @windshouter:

    Yes, the 1990s were a barren, desolate period for film and literature. Oh, and economics – the first edition of Greg Mankiw’s intro textbook came out in 1997. One shudders to think how he even brought himself to pound the thing out, distraught as he no doubt was at the 39.6% marginal federal tax rate he was paying on his $1.4 million advance.

  61. 61
    Jeff says:

    If Mankiw’s argument made any sense at all, then the economy would have sucked during the Clinton years, since the plan is to return to Clinton-era tax rates.

    (By the way, we should accurately refer to this as the “Bush tax increase,” not the “Obama tax increase” as some politicians have been calling it. Bush is the one who signed into law a tax cut that was intended to expire after 10 years so the Republicans could pass it without a filibuster-proof majority in the Senate.)

  62. 62
    eemom says:

    Is EVERY post on this lovely Sunday going to feature lengthy quotations from insufferable assholes who ought to be strapped onto rockets and fired into the void of space?

    Nah, I guess there’ll be a football post next. Sigh.

  63. 63
    Redshirt says:

    Yay! Thank you John Cole. I don’t care what those other jackasses say about you. You’re alright.

  64. 64
    Maude says:

    @beltane:
    You made a rhyme.
    You haz a proud.

    I’m stealing it.

  65. 65
    fasteddie9318 says:

    Hey, if I invest the $5 I have in my wallet in something that tomorrow will be worth 1 billion times what it is today, I’d have $5 billion tomorrow. But because, I assume, the government fucked everything up by taxing shit or some regulation bullshit, I’m still going to have that same goddamn $5 tomorrow. I’m effectively being taxed at a rate of 99.999999999%. Holy fuck, why is the government screwing me like this? I have no choice but to quit working, crawl into a ditch, and subsist on rainwater and grubs for the rest of my life just to teach all you leeches a lesson.

    If only Mankiw’s effective tax rate really was 90%; that would mean the feds finally instituted my proposed 90% tax on being a brain dead moron trying to pass himself off as an expert. And my confiscatory estate tax on the pampered children of such shitheads would claim the other 10% once he finally goes the big Galt.

  66. 66
    Dennis SGMM says:

    At last I understand why we don’t have the flying cars, personal jetpacks, robots to do all the work, and colonies on Mars that were promised when I was a kid back in the Fifties: the then-90% top tax rate discouraged all of the inventors.

  67. 67
    Ash Can says:

    Greg Mankiw…decides that higher taxes will lead him to deny us some of his labor.

    I’m not going to click on the link, because I don’t want to waste three minutes of my life. But at least in the passages cited, Mankiw doesn’t say anything about going Galt himself. Could that be because there are other factors besides taxes that motivate him one way or the other in the workplace? Like, for example, getting fired if he doesn’t go ahead and provide that column by the paper’s deadline regardless of whether he’s doing it under a higher tax rate? Oh, and I love how Randroids all assume that the only reason anyone ever does any work is money. Yup, actors, writers, artists, and musicians are totally in it for the dough.

    I’d call this guy a tool, but tools are useful. He and the rest of his Galtian jack-offs would be a lot more fun to mock if they weren’t so goddamned destructive.

  68. 68
    Jennifer says:

    RE: the workers who refused overtime because they didn’t want to pay higher taxes – obviously they’re in that group of folks who don’t understand the concept of the “marginal rate”. There are surprisingly quite a few people in upper income brackets who also don’t understand this. You’d think anyone who has piled up a lot of money and whose primary concern is more more more of it would go to the trouble of becoming educated on the most basic concepts, but sadly, you’d be wrong. This group’s curiousity and understanding begins and ends with “but…but…but…39.6% is MORE THAN 36%, so THERE!!!”

  69. 69
    Zuzu's Petals says:

    @Basilisc:

    Yeah, my thought exactly. I mean, the guy was turning down work in 2001?

    I also love his intellectual dishonesty in saying he would not be paying any estate taxes if Obama didn’t “increase” them.

    It’s just breathtaking that this guy teaches economics, much less at Harvard.

  70. 70
    Morbo says:

    I’m pretty sure Mankiw is just self-plagiarizing here and has written this article before. I might go Galt on looking it up if I can’t find it in 10 minutes.

  71. 71
    Viva BrisVegas says:

    Is there a law formulated which describes the inverse relationship between a person’s actual value to society and their inflated opinion of their self worth?

    If not, I claim it.

  72. 72
    TheF79 says:

    There is some response of the labor supply (in aggregate) to taxes and prices (labor supply elasticity). Many people seem to be comparing 750 dollars with 0 dollars and saying “who’s stupid enough to not take that money?” By that reasoning, all of you sitting around on a Sunday morning reading blogs are stupid for not picking up a shift at your workplace or getting a second/third job. But you don’t always get that other job or jump at an extra shift because people value their leisure time. I’m not working at Starbucks right now because after working a 50-60 hour week, I want to spend some time with my wife and my Xbox.

    What Mankiw is whinily referencing here is that tax rates will slightly affect his labor-leisure tradeoff decisions. Boo-hoo Greg, clearly your tax rate should be zero to encourage your productivity. But wait, if we cut taxes, then our deficit situtation would be worsened. But wait again, cutting taxes increases revenue – Laffer Curve rides to the rescue once again, justifying why rich folks deserve tax breaks on the backs of the middle class.

  73. 73
    Mnemosyne says:

    @burnspbesq:

    Your data set is not my data set. If you had a shred of intellectual honesty, you wouldn’t play that bullshit game.

    Your data set was not Mankiw’s data set, either, and yet you used it to try and claim his critics were wrong.

    Pot, meet kettle. You two have a lot in common.

  74. 74
    Sly says:

    My favorite scene from L.A. Confidential always seems to apply to any discussion on people, like the fictitious Mr. Galt, who think the supplies capital are constant and this fact makes them essential to society to the point where you have to placate their every selfish (and ultimately counter-productive) demand.

    If Mr. Mankiw withholds his productive capacity, ten more assholes will come and take his place the next day.

    They just won’t come on a bus, that’s all.

  75. 75
    MikeBoyScout says:

    On a brighter note, Mankiw’s dreadful column with its pathos dripping title is prima facie that the marginal tax rate is way too low.

    Mankiw demonstrates quite effectively that people like him are keeping way too much money allowing them far too much leisure and not working nearly enough.

    AND…. aren’t you glad neither you nor your progeny will be besmirched as Harvard University economics alumni?

  76. 76
    Karmakin says:

    Jennifer:The problem is that for hourly workers, the marginal rate is a long-term consideration, which is something that a lot of people don’t really have.

    My last employer, for example, witheld X% of my earnings. for taxes. However, if I made more than Y, then the % jumped up to Z. With the way the numbers worked, at least on your immediate paycheck, there was a dead zone of sorts where you actually worked more and took home less.

    Now, I know that generally you’d get all that extra back in tax refunds at the end of the year. But again, to the person who’s living pay to pay in terms of money, that’s not really a consideration.

    Edit:And considering that my previous employer used a VERY common outsource company for payroll, I suspect this is extremely common.

  77. 77
    Bubba Dave says:

    @Ron:
    Of course the place where that DOES happen is at the low end, where one dollar of additional income can cost you hundreds of dollars in food stamps. You’d think that a conservative party that wants to encourage work would want to change that incentive– too bad our conservative party only wants to hate on poor people.

  78. 78
    maskling says:

    his premise is bullshit. higher taxes on the wealthy encourage them to do more, not less.

    say i am a rich guy, own three big grocery stores, a coal mine, and a workhouse for orphans that makes shoes. my taxes go up 10%. now my ski trips to gstaad, my kid’s private schools, and my trophy wife’s expensive facelifts are harder to pay for. so i and the family go live in a ditch, yes? we live like savages now…

    christ no. i open another grocery store and train more orphans. i expand! that is how the world works, last i checked.

    am i stupid? does no-one else see this? i never, ever ever, not once ever, hear this fact discussed in the media. not even on my liberal fascist blogs. wtf?

  79. 79
    Mnemosyne says:

    @Karmakin:

    My last employer, for example, witheld X% of my earnings. for taxes. However, if I made more than Y, then the % jumped up to Z. With the way the numbers worked, at least on your immediate paycheck, there was a dead zone of sorts where you actually worked more and took home less.

    But that happened because you needed to re-adjust your withholdings, which your employer can’t do for you. It’s not a problem with the tax code per se, it’s a problem with people not understanding how taxes work and that there are adjustments they need to make.

    Of course, some people go the opposite direction, set their withholdings too low, and get socked with a big tax bill at the end of the year but, again, that’s not because the big bad gubbmint is trying to steal all of their money.

  80. 80
    John S. says:

    @Mnemosyne:

    That was the point of my data set, which apparently you were the only one to pick up on (I’m surprised JMN master accountant missed what I thought was fairly obvious). To recap:

    1. Mankiw makes a silly point about the corporate tax rate, conflating the effective rate with the nominal rate.

    2. Mistermix correctly mocks Mankiw for this.

    3. Burnspbesq makes an asinine comment excoriating mistermix for being wrong about his while using unrelated data points and ignoring Mankiw’s argument.

    4. I point out that mistermix was correct in his statement, as also pointed by renato.

    5. Burnspbesq pretend he is a genius/tough guy while fundamentally ignoring Mankiw’s argument and mistermix’s assessment thereof, because he’s a smug asshole.

    So I fail to see how that makes it the pot calling the kettle black. Mistermix was right for mocking Mankiw. I provided the data that shows he was correct in doing so. And Burnspbesq can go find a corner to cry in alone. I have fuck all in common with him.

  81. 81
    John S. says:

    @That’s Master of Accountancy to You, Pal (JMN):

    Reading comprehension is your friend.

    @burnspbesq:

    Fuck you, too.

  82. 82
    scarshapedstar says:

    As a med school applicant, there is literally nothing that could make me happier than for a bunch of cranky old millionaire doctors to abdicate en masse.

  83. 83
    Omnes Omnibus says:

    @Mnemosyne: You are right about the reason that take home pay can go down with extra hours worked. However, Karmakin’s point still stands because the people to whom this happens don’t understand the system and don’t make adjustments to their withhold every couple of weeks depending on their overtime status. What they perceive is a decrease in money taken home due to taxes on extra income and it plays into Republican hands.

  84. 84
    MTiffany says:

    “Or, someday, you may need treatment from a highly trained surgeon, or your child may need braces from the local orthodontist.”
    Last I checked, the Hippocratic oath didn’t say a fucking word about profit margins or marginal tax rates. Any doctor who is more motivated by money than by the desire to ease suffering is a shitty doctor.

  85. 85
    bootsy says:

    @scarshapedstar: Amen.

    Also, too, if a 3% rise in personal rates will make them give up “working” for that wingnut welfare, I’m really interested in knowing which rate will make them jump off a bridge.

  86. 86
    Cacti says:

    Like me, these individuals respond to incentives.

    Hmmm…

    I would think the fact that they’re compensated at a level that puts them in the 99th percentile of the entire human race would be incentive enough.

    But srsly, if some galtian superman wants to move to Somalia and see if he can make $500K USD per annum as a surgeon, or $20m a picture for making films, I’ll happily wave them off at the airport.

  87. 87
    El Cid says:

    @Jennifer: I rarely encounter people who understand the concept of marginal tax rates. They think it’s like a trap sprung, that once you get to the next tax bracket the gubmit springs out from the alley and takes all your money at the higher rate.

    I also keep encountering people who believe that unlike the government they have to balance their budgets every month, and I have to point out that they have 20 year mortgages, rotating credit card balances, a car loan that they couldn’t immediately pay off, often student loans they’re still paying, and they work for companies who have mortgaged properties, have taken out loans for tools or other improvements and rely upon short term loans to pay for stock and salaries.

  88. 88
    Sly says:

    @scarshapedstar:

    As a med school applicant, there is literally nothing that could make me happier than for a bunch of cranky old millionaire doctors to abdicate en masse.

    Which illustrates my previous point perfectly.

    A version of Atlas Shrugged more closer to reality would have entailed Mr. Galt moving out to his gulch but instead of other millionaire industrialists joining him, in a move of collective solidarity that is oddly immoral for the working class, they instead all competed for the market share he abandoned.

  89. 89
    cckids says:

    @gene108:

    I don’t get the higher tax discourages working more for more money argument.

    Are people really willing to forgo earning an extra $1,000 in income because they’d pay $250 in taxes on it and only have a net of $750 dollars?

    And yet, those who argue that this is true are the same people who cry “slacker” on the working poor who can’t take a $25 raise because it will lose them & their kids their Medicaid, food stamps, etc. Because that’s completely different, of course.

  90. 90
    fasteddie9318 says:

    @Omnes Omnibus:

    I suppose for the person who’s too stupid to know that you need to change your withholding rate to increase your net weekly pay, the big tax refund they get for having withheld too much from their weekly paycheck is just Supply Side Jesus sending manna down to them from On High.

  91. 91
    Cacti says:

    @Sly:

    Maybe you are looking forward to a particular actor’s next movie or a particular novelist’s next book. Perhaps you wish that your favorite singer would have a concert near where you live. Or, someday, you may need treatment from a highly trained surgeon, or your child may need braces from the local orthodontist. Like me, these individuals respond to incentives.

    Randism is the ultimate expression of special snowflake syndrome. “I’m so brilliant, that if I disappeared from the workforce tomorrow, no one could ever replace me.”

    Riiiiiiight.

  92. 92
    Omnes Omnibus says:

    @fasteddie9318: More or less. You have to remember though that with a lot of these people overtime varies, so it might not be a good idea to base their withholding on their big weeks. If they are living paycheck to paycheck, they want money to pay bills.

  93. 93
    uloborus says:

    @Omnes Omnibus:
    Also, this is no longer as simple a concept as ‘marginal tax rates never put me in a position where earning more means I get less’. It requires calculation and a more sophisticated understanding of the rules. You’ve just gone from ‘anyone should know this’ to ‘most people won’t know how to do this’.

  94. 94
    Larkspur says:

    @Karmakin: Oh, yeah, the overtime thing. My former employer forestalled that dilemma (which I agree is a real one) by cheerfully making me office manager and telling me that as a manager, I didn’t have to worry about overtime, ’cause I was above that. And he continued to work me half to death. Why didn’t I just kill him? To this day, I don’t know. I guess I just thought I had a chance at staying in the middle class.

    Maybe this Mankiw person is looking forward to visiting a clean restroom at his favorite cafe, or ordering and consuming a sandwich, the ingredients of which haven’t been first dropped onto the unmopped floor. Possibly he’s hoping that the equipment at his child’s orthodontist’s office has been sterilized properly. Too bad, so sad. Consider me unincentivized. People like me respond to threats, although maybe not how he’d like.

  95. 95
    El Cid says:

    @Cacti: “The cemeteries of the world are full of indispensable men.”

  96. 96
    Larkspur says:

    Well, in 150 years, all new people.

  97. 97
    Comrade Kevin says:

    Yesterday I was out in the car and happened to end up behind someone driving an SUV with a “Who is John Galt?” license plate frame. Best laugh I had all day, until Lane Kiffin lost another football game.

  98. 98

    Didn’t Bushco already give these people a bunch of money?

    Where’s the companies they started, the research they funded, all those goodies we were supposed to get?

  99. 99
    Sly says:

    @Cacti:

    Randism is the ultimate expression of special snowflake syndrome. “I’m so brilliant, that if I disappeared from the workforce tomorrow, no one could ever replace me.”
    __
    Riiiiiiight.

    When the reality is there are tons of people ready, willing, and able to replace them. If Charles Holliday woke up tomorrow and said, “Fuck it. If my taxes go up, I’m retiring from being CEO of Bank of America. I think I’ll spend the rest of my days on a beach happily sipping Mai Tais with a few dozen scantily-clad twenty year old vixens at my beck and call,” precisely two kinds of people will have any sort of emotional reaction.

    1) His wife Ann Holiday, who would likely not be pleased until she got her fat divorce settlement.

    2) Every BoA Vice President who will immediately start fighting for the right to sit in the big chair.

    Repeat ad nauseum for every captain of industry in the world. They aren’t adding anything that someone slightly lower down on the corporate totem poll can offer (and at a discount). “Going Galt” should not be taken as a threat, it should be taken as a cost-savings opportunity.

  100. 100
    racrecir says:

    test

  101. 101
    Martin says:

    Good. Please retire. I beg of you.

  102. 102
    eemom says:

    @Larkspur:

    Maybe this Mankiw person is looking forward to visiting a clean restroom at his favorite cafe, or ordering and consuming a sandwich, the ingredients of which haven’t been first dropped onto the unmopped floor. Possibly he’s hoping that the equipment at his child’s orthodontist’s office has been sterilized properly. Too bad, so sad. Consider me unincentivized. People like me respond to threats, although maybe not how he’d like.

    Excellent. May I suggest you put that in an e-mail to Professor Wanky?

    Considering that he seems inclined in that direction anyway, it might just plant a little seed of paranoia in his erudite mind that the Great Unwashed Masses are, in fact, out to get him by poisoning his food supply. Then he might gradually go insane, lose everything and end up Galting on a Cambridge sidewalk with a tin cup. You never know.

  103. 103
    asiangrrlMN says:

    New rule. Anyone who talks about going Galt, threatens to go Galt, mutters about going Galt has to do it within a week or shut the fuck up permanently. All this Galt whining is getting on my fucking nerves.

    TUNCHIE!

  104. 104
    EIGRP says:

    I have a coworker who threatens to go Galt all the time. He can support his wife and kids and 2 houses just by living off of unemployment (i.e. the government handouts).

    I always encourage him to try it and let me know how it works out. That usually shuts him up quick.

    Eric

  105. 105
    burnspbesq says:

    Brad DeLong is smarter than all of us combined, and he delivers the ultimate smackdown.

    http://delong.typepad.com/sdj/.....times.html

  106. 106
    Delia says:

    How much money has John Cole made from his famous Galtian Dog in a Bukkit photo? Not enough. And yet he soldiers on, refusing to withhold his productivitee, disproving Greg Mankiw every day. It’s perplexing. Or inspiring. Or something.

  107. 107
    JR says:

    Have any of these supply-side zealots stopped to think that lower top-end tax rates mean that the wealthy will actually reach their wealth targets sooner, thus causing them to withhold productivity anyway through over-compensation? Or do economic theories only hold water when they lead to lower taxes for rich people?

  108. 108
    cs says:

    “The graveyard is full of indispensable men.”

    This quote should be hurled at anyone who threatens to go Galt.

  109. 109
    ronathan richardson says:

    My response to the argument that increased taxes decrease productivity is always, simply, “well if high taxes mean that you need to work more to make the amount of money you want/need, then you’ll work more, not less.”

    Could someone point out how I’m wrong? Certainly I understand the argument that as an investor it makes less sense to put a lot of money in something if taxation makes it such that you won’t get as much money back if it works out. But your labor is a different thing, isn’t it?

  110. 110

    A slightly different slant: ever notice how incredibly SENSITIVE the wallet-nerve is in the Greedy Bastard Class?

    There is nothing that causes more pain or provokes more outrage than when somebody loses “phantom money,” or, “imaginary earnings.”

    Generally this pain is followed by feverish hallucinations where they see a “Welfare Queen” driving to the welfare office in the Cadillac that was purchased with the “hard-earned” sweaty-brow phantom cash that the Greedy Bastard imagines that they “earned” — implicitly by digging through solid rock with a pickaxe.

    Ouch! Ouch! Imaginary money lost from my wallet! Welfare queens! Cadillacs! Owwwwwwwwwwwwwww.

    St. Ronald of Reagan had his entire carcass covered with the stigmata of this horrifically painful condition.

  111. 111
    Dathi says:

    If you guys are ok with volunteering between 1.5 and two days of every work week to a bloated, largely corrupt & inept government, that’s ok with me. I’m not gonna stop you.

    If you think also that our elected representitives are in some way your “betters” who have better ideas about how to spend your money – well good for you, too !

    Please note that Tax Freedom Day fell on April 9th this year -the 99th day of 2010. This means that most working Americans toil away for almost 25% of each year just to feed a glutonnous government.

  112. 112

    @Sly:

    I’d love to see that scene re-enacted with Brad Delong as Guy Pierce, Paul Krugman as Russell Crowe and Greg Mankiw as Ron Rifkin. The thought of Mankiw being dangled out of window by Paul Krugman, pissing and crying and admitting that he’s a total fuck up and that the Laffer curve is a bunch of shit brings a huge smile to my face.

  113. 113
    Ron says:

    @Bubba Dave: That’s a good point, and one that always confused me about any of the food stamp/welfare programs. I don’t see why they shouldn’t “phase out” as income increases rather than simply cut off after you reach a certain point. People complain that people will stay on welfare rather than work because the work pays less. Seems to me the obvious fix is to say, “Okay, you are making $X/week on welfare and you can get a job for $Y/week (where YX). congratulations!”. This can be modified as appropriate for food stamps as well.

  114. 114
    Ron says:

    @Ron: I have no idea what happened there, other than something ate part of my response. (requesting deletion failed. sigh). So what it was supposed to say was after the “you got $x and now you make $y” was “Where Y is less than X (attempting to use the symbol failed me before)” and then “You now get $Z/week in benefits” where Z was some number that made Y+Z bigger than X. Ugh, stupid me trying to use mathematical symbols.

  115. 115
    Nancy Irving says:

    “As they face higher tax rates, their services will be in shorter supply.”

    Um, doesn’t he believe in the law of supply and demand? Doesn’t he realize that others will step in to fill their stupid-*ss shoes? Of course nobody can fill Mankiew’s shoes, but…

    The idea that writers and artists will fall silent because of high taxes is particularly inane. If their narcissism doesn’t keep them cranking it out, their typical mismanagement of their affairs will keep them producing, if only to pay the tax man what they already owe from previous years.

    As for “the most productive members of society”–our put-upon entrepreneurs, I wish they *would* go Galt. Then maybe the rest of us would have a chance to make a few bucks.

  116. 116
    grendelkhan says:

    or a particular novelist’s next book

    Does this guy know how much novelists actually make? Perhaps, just as fabulously wealthy people are the only people that matter, fabulously wealthy writers are the only ones that matter, despite being a tiny minority.

    @Xboxershorts: I’m still limited to investing in food, and let me tell you, the returns are VERY shitty.

    Quotefiled!

    @TheF79: By that reasoning, all of you sitting around on a Sunday morning reading blogs are stupid for not picking up a shift at your workplace or getting a second/third job. But you don’t always get that other job or jump at an extra shift because people value their leisure time.

    Do you know why most people aren’t working a second or third job? It’s because it’s hard enough to find a first job right now. Your economic model has a gigantic fucking hole in it; you might want to patch that.

  117. 117
    PoliticallySpeaking says:

    I am calling “shenanigans” on Professor Mankiw’s math.

    1) To make a comparison between the scheduled tax cut expiration and no taxes is ridiculous. Imagine two kids bragging about how high they can jump – one declares “without gravity I could reach the Moon!”… what relevance is that theoretical lack of gravity/tax to reality? Making a comparison between a no-tax world and an incrementally higher tax world when debating the merits of that incrementally higher rate fails Logic 101.

    2) The Professor also compares the interest he can make in that imaginary no-tax world to the full tax rate in the real world. Any comparisons must be made using realistic figures – what are the potential returns at the current rate vs. the rate if the Bush cuts expire as planned? The Professor just failed his make-up test in Logic 101.

    3) The Professor’s article concerns the expiring Bush tax cuts, yet when it is convenient he adds other taxes into the mix, such as estate taxes and Medicare rates. Again – if he is debating the merits of the Bush rates expiring, all computations should be limited to the rates in effect with and without the expiration. The Medicare rates will be the same regardless of the Bush rates expiring. And as mentioned earlier, a no-tax world is irrelevant.

    The Professor’s main argument is that higher taxes create disincentive to work. Economics 101 teaches that this is correct – the incremental earnings at the higher rate are less than at a lower rate. However, Professor Mankiw fails to provide a convincing argument due to his horrid logic failures and propensity to add or discard taxes to bolster his computations. My guess is that any of his students who tried to pull the failed stunts the Professor pulled would get a failing grade.

  118. 118
    JRon says:

    This thread may be about spent, but we are reminded that this has occurred throughout history. Surely it is the mark of an oppressive society that one can become wealthy simply by losing power and railing against the government:

    http://shallowsage.com/post/1298318819

    His audience was hopeful, but doubted he would ever leave the spotlight.
    (Sacchi, 1631)

Comments are closed.