US Politics Mega-thread - Page 262

On May 29 2013 20:09 mcc wrote:

Correlation is not causation, how do you know that some other factor is not causing changes to both of the attributes you displayed ?

For example "political climate" can cause tax rates to go down and at the same time influence passing/revoking of other laws that make it possible for rich to get more wealthy.

I am not saying you are wrong and I am far from saying that my scenario is true (I am rather sure it is not), but I would be more cautious about calling causation. I think you would need to at least analyze how much did they save on taxes and analyze how much money could have been gained by investing that saved money. Which would be pretty hard to do without rather sophisticated model. But looking at the graph, the correlation seems to be near immediate, so maybe it would be enough to analyze how much they saved on lower tax rates and if it explains majority of the wealth gain.

On May 29 2013 21:54 oneofthem wrote:
well, when the marginal rate on a slice of income is approaching 90%, it makes sense for that rate to have a large impact on income share, whether it is through taxing that income away, or through making people rearrange their income stream to avoid the tax.

On May 29 2013 20:54 aksfjh wrote:

I don't have enough of an economic and/or political science background to make detailed analysis to prove causation. However, causation would be logically consistent in this case, especially in the earlier half of the century. The 2 variables seem to be linked without being dependent, unlike, say debt to GDP ratios vs GDP or GDP growth. In that example, you have to look at more data to make bold statements, like one causes the other. In the graph above, however, we know that higher income share doesn't cause rates to go down instantaneously, so that reverse causation possibility is eliminated. The only other likely scenarios involve either culture shifts (which are gradual, so a rapid jump mid 1980s seems out of place) and major policy changes. Those major policy changes in the 80s deal mostly with tax policy. About the worst I could do with my assumption is that large changes in tax policy outside of marginal rates play the primary role and marginal rates just happen to coincide, but that's really hard to prove.

If I were doing real research on this, I would probably focus on determining if the income share of the top is stable or unstable depending on tax rates or why the correlation decouples in the mid 90s (this is probably where policy or capital gains come in).

On May 30 2013 02:24 {CC}StealthBlue wrote:
All the comedians in this country are in mourning, Michelle Bachmann is retiring after 8 years.

LA Syncs Traffic Lights, Shaves Commute Times

Los Angeles has become an unwilling symbol of America's worsening traffic congestion—its highways and byways often frozen during the steadily expanding period still know as rush hour.

But city planners are betting they can significantly speed things up in the months to come after completing a project that has been in the works for almost three decades.

From the smallest neighborhoods to the biggest downtown intersections, the city has synced all of its stoplights. Covering a vast 469 square miles, LA is the first major city to achieve that milestone and is already showing a reduction in drive times by about 12 percent in some parts of the city.

On May 30 2013 03:20 Souma wrote:
Took almost three decades... o_O

On May 30 2013 03:31 NPF wrote:


Well you don't want to replace a working stop light just so you can sync and wire it up now. You wait till it fails sometimes would be my guess.

Part of the challenge was coming up with the computer capability to properly analyze the city's vast stoplight network, calculate in posted speed limits and then come up with the proper timing algorithm. That, in itself, wasn't going to be cheap, but adding in the network to control all those stoplights brought the price tag of the project up to around $350 million. And considering the financial problems facing California and its communities, the project had to be stretched out for nearly 30 years.

The programming isn't inflexible. The project has also resulted in a network of cameras that can give traffic managers a real-time look at what's happening on LA streets. They can make rapid changes to reflect shifting daily commute patterns – as well as construction and traffic accidents.

On May 30 2013 01:46 JonnyBNoHo wrote:

I don't think it's being taxed away (unless you meant indirectly as well?). The average tax rate on the 1% in 1979 was 35.1% compared to a 35.3% average tax rate in 1995 (source) despite vastly different top marginal rates.

Rearranging income sounds very plausible.


What do you think the causation is/would be though? Are the rich shrugging off the tax and accepting lower income? Or are they changing their behavior? My suspicion is that a higher tax would lead to behavior changes much more often than benign acceptance, which is a problem from a tax policy perspective.

The 1980's is the part of the graph where correlation looks really strong. During that time businesses in the US were undergoing some pretty radical changes. Those changes certainly went hand in hand with tax changes. My point here being that cultural changes can happen much faster in the business sector than the country as a whole.

On May 30 2013 03:42 aksfjh wrote:

I want to clarify that I'm not talking about taxes in this sense as strictly a means of generating revenue. I'm looking at the data in more of a "how did income inequality get so great" light, and less of a "how do we pay for government?" Thus, I'm mostly talking about behavioral changes anyways.

I've knocked around the theory before that higher tax rates at the top actually encourage investment much more than we're led to believe. My experience is anecdotal, mainly pertaining to business owners wanting to put their money to "better use" than the government. Instead of letting Uncle Sam take 50-70% of that next 50-100k that you don't "need," you hire 2 workers or reinvest in your business to make your life easier running the business and/or increase competitiveness. The opportunity cost is drastically reduced because the government would be taking a lot of that money anyways. So, in a sense, they aren't "shrugging off the tax" as much as they are finding ways to use that money before the government can get to it.

Business culture, in my opinion, does change faster than in the community and at home, but it still takes close to a decade to see those changes permeate the market. Think about how long it took small offices to adopt computers and electronic databases. The income inequality gap trend since the drastic reversal in marginal tax rates at the top in the 80s could possibly be described as culture slowly changing to accommodate the shock. Policy experts have theorized that business culture changed in the 80s, in a way that removed the stigma around very generous compensation for executives.

On May 30 2013 03:57 JonnyBNoHo wrote:

That's possible, but it likely wouldn't be good (i.e. productive) investment. Prior to the 80's US businesses were plagued by bloated management structures and empire building. Lower tax rates gave owners an incentive to increase competitiveness because they'd actually benefit from it.

On May 30 2013 04:14 aksfjh wrote:

They did benefit from it before, just not monetarily. And it was good, in a sense, but not directly. While it bloated payrolls, it also propped up the middle class and made it possible for people to make important choices in life (college, housing, training), as opposed to the road map and dice roll we have today.

On May 30 2013 04:29 JonnyBNoHo wrote:

That kind of propping up is unsustainable. If companies were similarly bloated today they'd be getting crushed by foreign competitors and productivity would be stagnant.

On May 30 2013 02:48 Sermokala wrote:
The jokes on us, shes probably going to try to run for president again.

On May 30 2013 03:42 aksfjh wrote:

I want to clarify that I'm not talking about taxes in this sense as strictly a means of generating revenue. I'm looking at the data in more of a "how did income inequality get so great" light, and less of a "how do we pay for government?" Thus, I'm mostly talking about behavioral changes anyways.

I've knocked around the theory before that higher tax rates at the top actually encourage investment much more than we're led to believe. My experience is anecdotal, mainly pertaining to business owners wanting to put their money to "better use" than the government. Instead of letting Uncle Sam take 50-70% of that next 50-100k that you don't "need," you hire 2 workers or reinvest in your business to make your life easier running the business and/or increase competitiveness. The opportunity cost is drastically reduced because the government would be taking a lot of that money anyways. So, in a sense, they aren't "shrugging off the tax" as much as they are finding ways to use that money before the government can get to it.

Business culture, in my opinion, does change faster than in the community and at home, but it still takes close to a decade to see those changes permeate the market. Think about how long it took small offices to adopt computers and electronic databases. The income inequality gap trend since the drastic reversal in marginal tax rates at the top in the 80s could possibly be described as culture slowly changing to accommodate the shock. Policy experts have theorized that business culture changed in the 80s, in a way that removed the stigma around very generous compensation for executives.

On May 30 2013 06:09 Sermokala wrote:
A small tariff on foreign production would jump start the american manufacturing industry. The big reason why manufacturing jobs have come back to america in recent years is that the long supply lines and resulting large transport costs from bringing product from overseas to american markets.

We don't need a tariff on every single simple manufacturing industry but picking and choosing a few low-medium tech jobs that are on the border zone of being worth it to bring the jobs back to america would pay itself back a dozen fold.

We should stop this mad enslavement to free trade and actually use the concept from the perspective to help our country first and the rest of the world second.