Monday, June 25, 2018

An Effective Marginal Tax Rate

Interesting numbers from Phil Gramm and Robert B. Ekelund Jr.:
The bottom quintile earned 2.2% of all earned income in 2013, but after adjusting for taxes and transfer payments, its share of spendable income rose to 12.9%—six times its proportion of earnings. The second quintile’s share more than doubled, rising from 7% of earned income to 13.9% of spendable income. For the third quintile, middle-income Americans, the increase was much smaller, from 12.6% to 15.4%.
To put it another way, the effective marginal tax rate when a person moves from the bottom to the middle quintile is 1 - (15.4-12.9)/(12.6-2.2), or 76 percent.

Update: A reader points out that this calculation does not take into account various types of heterogeneity that might be correlated with income. True, but the graph in this old post shows that this probably does not matter much. Those in the bottom half of the income distribution face very high effective marginal tax rates.

Saturday, June 23, 2018

A Response, along with a Movie Recommendation

A couple readers emailed me about yesterday's post, asking me whether I want to enforce the law. The implicit suggestion is that President Trump's immigration policy is simply law enforcement.

Of course, I believe in law enforcement, but enforcement has to be proportionate. Double parking is illegal, but we don't execute people for double parking. We give them a ticket.

The Trump administration's response to illegal immigration is vastly disproportionate. He paints a picture of the nation being ruined by illegal immigration, but that is just not true. He is doing great harm to many people to solve a problem that is largely fictional.

I don't pretend to fully understand Mr Trump's goals and actions, but his supporters seem motivated by a combination of understandable economic and cultural anxiety, misdirected blame, and in some cases latent prejudice. Mr Trump seems to play to that combination for purposes of self-aggrandizement.

Yesterday, I saw the movie Burden, a story about a man raised within the KKK community and his personal struggle to escape from it. I highly recommend the film. Along with the book Hillbilly Elegy, it does a good job of explaining the culture and perspectives of less educated white Americans, who are Mr Trump's base.

Friday, June 22, 2018

Anti-liberal Trolls

David Brooks:
For centuries, conservatives have repeated a specific critique against state power. Statism, conservatives have argued, has a tendency to become brutalist and inhumane because a bureaucracy can’t see or account for the complexity of reality. It tries to impose uniform rules on the organic intricacy of human relationships. Statist social engineering projects cause horrific suffering because in the mind of statists, the abstract rule is more important than the human being in front of them. The person must be crushed for the sake of the abstraction. 
This is exactly what the Trump immigration policies are doing. Families are ripped apart and children are left weeping by the fences constructed by government officials blindly following a regulation. 
This illustrates something crucial about this administration. It is not populated by conservatives. It is populated by anti-liberal trolls. 

Friday, June 15, 2018

Why Aren’t More Men Working?

Click here to read my column in Sunday's New York Times.

Wednesday, June 06, 2018

What a Sensible President Sounds Like