Some people actually believe this

It turns out that if you massively cut taxes for rich people, and at the same time suppress worker wages and reduce worker power (in “deregulation” and “market efficiency”), it’s really good for rich people.

So we should have more regulation and thus market inefficiency and we’ll all get richer?

12 thoughts on “Some people actually believe this”

  1. Tax cuts are always defined as “tax cuts for rich people” even when they include tax cuts for everybody else as well. Anyway, hasn’t it been empirically proven that low tax economies tend to make everyone more prosperous? In some cases even the tax take rises despite the rates being cut due to the increase in economic activity.

  2. The one thing more than any other that suppresses wages for the masses is mass immigration. Something tells me that the authors of this piece are quite happy with that sort of wage suppression. And ironically so are the capitalists that they dislike so much – far easier to pay dirt poor foreigners to do crappy jobs for minimum wage than have to pay decent wages to attract staff, or invest in new technology.

  3. Wait until the Work from Home revolution starts coming for white collar, professional jobs. The kind of thing that Tim is doing, from any corner of the world.
    Only then will we get the backlash against immigration. Either that or ban private schooling and healthcare, so the elites have to slum it with the rest of us.

  4. OK. So how do we explain the 1960s/1970s when ‘the workers controlled the means of production’ all major industry, utilities, transportation, mining, being State run, heavily unionised – even large private firms were – where ‘worker power’ was supreme.

    Meanwhile ‘the rich’ were taxed ‘until the pips squeak’, 83% Income tax plus 15% supertax on unearned income to give top marginal of 98%. Corporation tax 50% plus.

    How is it we needed IMF support (Banana Republic), devaluation of the Pound (won’t affect the Pound in your pocket), had inflation at 22%, mortgage rate at 16%, constant ‘worker power’ strikes, increasing unemployment, a ‘brain drain’ as academics, scientists and other professionals fled abroad, and the economy was circling the drain? (Crisis? What crisis?)

    We live in the Age of Ahistory where nothing happened before yesterday.

  5. I thought Saez/Zucman found that the revenue maximising marginal rate on the highest earners was in the 52-57% range.
    Which sort of fits in with predictions that the cut from 45 to 40% PAYE ( or 53.5 to 48.5 % all income taxations including NI*2 ) will not pay for itself.
    If the government cancelled the change and instead got rid of the 60% rate PAYE ( or 68.5 all income taxations ) that the UK has when you earn over 100k up to 120k then this would indeed pay for itself if the literature is correct. Please do this Kwasi.

  6. There’s a Laffer curve for regulation, obviously. Too much is bad, too little is bad. As with tax, the wrong kind is bad too; but that’s harder to show on a simple graph.

  7. @Bongo

    IFS estimate that the 45% rate cut will cost £6 bn with no behaviour change and the government’s £2 bn estimate with behavioural change is probably reasonable – they think even zero is perhaps plausible. Definitely the expectation is that it won’t quite pay for itself. But it does seem to be very much small beer despite all the wailing. Sorting out the stupid 100k anomaly would probably have been a better target as that’s both more manifestly stupid and unfair while also having a significant impact on eg senior doctors turning down extra work.

  8. Thank you Anon – I couldn’t remember where I saw that lose £6bn but gain £4bn estimate. It was the IFS as you said.

  9. When have markets ever been efficient?

    Gas went from $3/gallon to $1.25 to $5, or 400% inflation, over a couple years, and could easily go back to $3 at the whim of OPEC deciding they want market share again, yet markets are efficient?

  10. The definition of ‘efficiency’ in economics isn’t what you think it is. See also: Productivity.

  11. Can I quote Fischer Black in "Noise"?

    《As the amount of noise trading increases, it will become more profitable for people to trade on information, but only because the prices have more noise in them. The increase in the amount of information trading does not mean that prices are more efficient. Not only will more information traders come in, but existing information traders will take bigger positions and will spend more on information. Yet prices will be less efficient.7 What’s needed for a liquid market causes prices to be less efficient.》

    《we might define an efficient market as one in which price is within a factor of 2 of value, i.e., the price is more than half of value and less than twice value.11 The factor of 2 is arbitrary, of course. Intuitively, though, it seems reasonable to me, in the light of sources of uncertainty about value and the strength of the forces tending to cause price to return to value. By this definition, I think almost all markets are efficient almost all of the time. “Almost all” means at least 90%.》

    《Deviations from efficiency seem more significant in my world than in Merton’s, but much less significant in my world than in Shiller’s.》

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