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It's interesting to see contrasting articles on taxes & growth. There's this article about how South Korea raised taxes in a bid to grow faster and failed, but there are also plenty of articles about how Kansas's attempt to lower taxes in a bid to grow faster also failed [1], as well as predictions that California's high taxes would hamper growth (which hasn't really happened yet).

What if the actual conclusion is that it just doesn't matter. Growth is driven by other factors, like when a brilliant but insufferable physicist moves back home to be close to his mother [2], and is a function of individual, private firms performing functions of the economy more efficiently than existing incumbents. Tax policy follows as a consequence, and can go in either direction: either the newly-rich individuals think "Oh well, I've got plenty of money to spare, I can afford to burn some to ensure the people around me live decent lives", or they think "I want to keep more of this money to myself so I can decide how to allocate it." Regardless, wealth brings power, and so they have the ability to shape local government policy based on their particular worldview.

If this is correct, tax policy is a huge distraction, and if governments really want to jump-start growth they should be funding basic research, ensuring that the results are public (to their citizens, at least), and encouraging bright young people from across the world to immigrate to their jurisdictions.

[1] https://www.cbpp.org/research/state-budget-and-tax/kansas-pr...

[2] https://en.wikipedia.org/wiki/William_Shockley#Career

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What fixes an economy is...to fix whatever is broken about it. If your tax rate is 99% and it is causing massive tax accounting shenanigans to suck up otherwise valuable time and energy, reducing the tax rate is good. If your tax rate is 1% and your government can't do anything to maintain law and order, raising the tax rate is good.

If your tax rate is not the problem, then neither raising nor reducing it will fix the problem. Perhaps, in South Korea, the tax rate was not the problem.

The US had its lowest recorded murder rates (the most reliable crime statistic, since bodies are hard to either fake or ignore) recorded a decade before the 16th amendment was ratified[1][2]. Interestingly, the passage of the Dick Act[3] immediately preceded an at least fourfold spike in murders that has persisted ever since.

[1]https://en.wikipedia.org/wiki/List_of_countries_by_intention...

[2]https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_Uni...

[3]https://en.wikipedia.org/wiki/Militia_Act_of_1903

That was a time where America was rapidly urbanizing, where the populations of NYC, Chicago were increasing by like 30% a decade. The cities of the south really came into their own at this point, think Atlana. LA tripled in population from 1900 to 1910, and nearly doubled again from 1910 to 1920.

We had absolutely massive demographic shifts over the initial decades of the 20th century, and you're seriously going to pick income tax as the culprit of crime rising? Compared to 1900, 1920s America had a much different identity.

I wasn't going to respond to your parent as it was a blatant shitpost, but since there is a legitimate post here I got to say that I am actually curious what caused the quadrupled murder rate in just two years (1905-1907). There were no significant organized crime or changes in homicide reporting I could find, and the closest disturbance I could find seemed to be the Black Patch Tobacco Wars happening in Tennessee and Kentucky.

Wish we had more historians hanging around here

It seems that the number if states reporting their data changed during those years, only ten until 1905, and I'd bet that's the cause.

http://jessnevins.com/blog/?p=89

Almost certainly the way it was recorded.

My point wasn't to prove that income tax causes murders, it was to disprove that income tax prevents them.

You didn't prove or disprove anything because correlation does not imply causation. Unless you have a study to show that people are murdering each other specifically because of income tax it could have been due to literally anything else.

For instance, the divorce rate in Maine in perfectly correlated to per capita consumption of margarine, but one doesn't cause the other (http://tylervigen.com/spurious-correlations) -- or, for instance, the Dick Act was passed just a few years before WWI but it certainly didn't cause that either.

Since correlation is a consequence of causation, the absence of correlation suffices to disprove claims of causation.

I think it’s fair to say that what you spend that income tax on is vastly more relevant. Yes, I agree, the very act of taxing people and then spending it on, say, NASA (or burning it) doesn’t change the gun murder rate but nobody’s every made that assertion. The assertion is you can spend it on evidence based programs like gun control to reduce the murder rate — and there’s plenty of evidence in other countries that it works. The lack of correlation you spoke of isn’t relevant to the topic per se because the taxation act is a means to solutions, not a solution.

My favorite is that umbrella usage is highly correlated to rain.

My favorite is that trolling is highly correlated to the internet.

Taxes are one of the weakest ways to influence an economy (a complex system) or society at large for that matter.

Donella Meadows:

PLACES TO INTERVENE IN A SYSTEM

(in increasing order of effectiveness)

12. Constants, parameters, numbers (such as subsidies, taxes, standards).

11. The sizes of buffers and other stabilizing stocks, relative to their flows.

10. The structure of material stocks and flows (such as transport networks, population age structures).

9. The lengths of delays, relative to the rate of system change.

8. The strength of negative feedback loops, relative to the impacts they are trying to correct against.

7. The gain around driving positive feedback loops.

6. The structure of information flows (who does and does not have access to information).

5. The rules of the system (such as incentives, punishments, constraints).

4. The power to add, change, evolve, or self-organize system structure.

3. The goals of the system.

2. The mindset or paradigm out of which the system — its goals, structure, rules, delays, parameters — arises.

1. The power to transcend paradigms.

Serious, non-snarky question: WTF does this even mean? How is "the power to transcend paradigms" the most effective way to intervene in a system? How do you create a policy or a set of actions to actually influence an economy based on "the power to transcend paradigms"?

It seems to me that subsidies and taxes are obvious ways to shift the mindset of the system or "transcend paradigms" since we know taxes actually influence behavior. Look at sin taxes on smoking in the U.S., which not only directly reduced smoking but in turn have helped fund anti-smoking propaganda, which together have helped the rate of smoking in the U.S. plummet. Is this what is meant by "transcending paradigms" or "shifting mindsets"? If so, doesn't that really mean that taxes or subsidies can be one of the most effective ways to influence an economy?

It would help to read the context of that list [0]. She's discussing the different ways that you can change a system (its leverage points). Changing paradigms can cause the system to be changed substantially. But you're still acting within a narrow constraint (that of the paradigm you've changed to). Versus going beyond paradigms, and recognizing the value and potential in each of them. Synonyms of paradigm shift might also be culture change or mindset change.

The purpose of the leverage points is to change the system at a fundamental level. Changing taxes doesn't (until you hit extremes) cause that. The system continues to behave in the same way but with increased or reduced constraints. Consider birth control policies. Eliminating birth control (making it illegal, so not really eliminating it) can cause an initial increase in children born until a new stable point is reached. Once you make birth control legal again, unless there has been a culture change in the interim, the birth rate will drop to the prior level.

Taxes and subsidies are the same. They don't change the system at a fundamental level (or don't do so easily), they only alter its external behavior. But once they're restored to their prior levels the system will probably return to its same behavior.

As a tax example: Perhaps we want to encourage people to save money for retirement, so we give them a tax break on their IRA contributions. This seems to help, people are saving more for retirement (as measured by IRA contributions increasing). We remove the tax break, do they continue to contribute (it's now a part of the culture) or do they stop contributing (they only did it for the tax benefit)?

If they continue, then you managed to create a substantive culture change. But most likely you'll get a drop of contributions.

[0] http://donellameadows.org/archives/leverage-points-places-to...

That is a helpful explanation of Donella's thought process (thank you), but it doesn't really get to the heart of my question: how do you cause a cultural change or mindset change?

There are a limited number of ways to have any substantial effect on a bottom-up system like the economy in a free society. You can pass laws forbidding some activity, or offering benefits to try to encourage some activity. You can raise taxes to make an activity prohibitively expensive compared to the desired alternative. You can educate (or propagandize) the population to recognize or believe something. You can conscript people and force them to behave in a certain way (tough in a free society). There aren't too many other options.

When we're discussing how to increase growth, it's not really helpful to say that we should ignore one of the primary levers we have to play with, because that lever isn't nearly as powerful as "changing the paradigm". Okay, great, but what specific actions should we take (i.e. what lever should we play with) to change the paradigm, other than the lever we're talking about?

I'm trying to answer your question, and it's hard.

Really, though, you have to use all the leverage points (or a subset of them). The point of the list was not: Which of these will achieve the desired external behavior the best? The point is: Which of these will actually alter the system itself so that it doesn't regress when removed?

Prohibition didn't eliminate alcohol consumption, it only changed how it was acquired. It made use of a number of the leverage points but fundamentally the US was still a nation of alcohol consumers. Tobacco use has been reduced in the US, but not eliminated, through education and taxes on tobacco products. Education (at least for my generation, now mid-30s) seems to have had a huge impact and actually changed the way it's viewed (so it achieved a paradigm shift).

To change the system (and maybe the paradigm) you'll have to use several of them. Raise taxes on the product (#12). Increase information flow about the consequences of tobacco use (#6). Reduce the positive feedback loop of using it by making it "uncool" (#7). Introduce alternatives that provide the chemical fix (nicotine) without (as much of?) the health consequences via patches and gum (#4).

To directly attack the paradigm itself, you have to use education and propaganda. Which will have varying effectiveness. For points #1 and #2 to be useful, you either have to be an individual with an open mind and the ability to introspect, or a learning organization. That latter part gets harder and harder the larger the organization becomes. A small team can alter its course more easily than a small business, which is more adaptable than IBM or the US population.

Interesting, thanks for the explanation. In your example of what it took to change the system re smoking, you've described the effects of the "levers" that I listed above. In other words, Donella's list is better viewed is descriptive, not prescriptive. Maybe a better way to describe her list would be not as "places to intervene in a system", but lenses through which to view the changes wrought by the levers we have?

Anyways, it still seems to me that taxes are one of the primary tools we have to effect change, and the taxes themselves (individually or together with what we then do with the money generated) can fulfill most, if not all, of the categories on Donella's list.

> how do you cause a cultural change or mindset change?

You're right to call this out. It's the most difficult and elusive thing to achieve. However, it has been happening pretty continuously since the dawn of civilization. Thomas Kuhn sat down to study it in the 50's or 60's and published "The Structure of Scientific Revolutions." That book is one of the best treatments of this subject area to date. It is the book that popularized the term "paradigm shift."

https://en.wikipedia.org/wiki/The_Structure_of_Scientific_Re...

So that is, you wait for the gatekeepers to die.

Concrete example of “changing the paradigm” in economic history might be transitioning from an agrarian economy to an industrial economy. Even if you get literally all the details wrong, just doing something like that in the first place can lead to massive improvements, at least until you catch up and run into the constraints of getting the details wrong. (Example: the Soviet Union).

At a policy level? "Diversity" jumps to mind.

2. is basically the work of many think-tanks...

to shape beliefs and discourse in the direction of a particular perspective or worldview.

think socialism versus free-market capitalism versus libertarianism. two-party politics in the United States could be thought of as a paradigm.

these are the types of paradigms under evaluation. altering one of these at this layer has cascading effects on policies etc.

1. is basically the ability to create effective think-tanks to shape beliefs and discourse.

> The power to transcend paradigms.

What is the level of peer-support for this amongst mainstream economists? It sounds like woo.

Context matters here. This list is from Thinking In Systems and it simply presents a high level model for leverage points at which to intervene in a system. It doesn't specify any system in particular and the author notes that you have to intervene at the level that is both effective and possible. It's not as if the recommendation is "a paradigm shift is required".

Economists don't tend to concern themselves with this. You're better off looking to philosophers, sociologists, etc.

Christianity -> Science is a notable example of a paradigm shift.

Hunter-gather -> Argiculture is another such shift.

Also, it probably doesn't sell many comic books.~

It is woo. My translator says it means, "to invite me to do a TED talk, send a DM".

Donella Meadows passed away 19 years ago, in 2001.

https://en.wikipedia.org/wiki/Donella_Meadows

Just leave off items #1 and #2 if it bugs you. The rest of the list shows a progression, and changing the goals of a system undoubtedly creates greater change than twiddling knobs.

For an example of #3... I dunno, change the definition of GDP. That affects a ton of stuff.

Why is it you think that this is woo?

In the absence of strong evidence to the contrary, strong claims are de facto woo, except when presented as highly tenuous hypotheses or theories. The default is skepticism, although economists seem to get a pass.

Or just the use of the phrase “transcend paradigm” - all it needs is a PowerPoint slide deck with a marble background pattern.

I like this list enough that I intend to read more by Meadows, but it seems to me that tax policy isn't just limited to #12, but can play a notable role in #11 down through #5. Particularly #5 and #6. In fact, a lot of the items on the list aren't entirely distinct from one another.

That doesn't mean the list is bad -- I think it's powerful enough to try and articulate as many semi-distinct inflection points for a system as one can. Just that I'm not sure that the ranking is pure.

Are those ranked by perceived impact?

Yes. The closer to 1, the greater the impact to the fundamental system. The purpose of those leverage points are not just to change the external behavior of a system but to change the system itself.

You can change the external behavior of an economy by increasing/decreasing taxes. But this may not alter the fundamental system itself.

Consider #9: Length of delays relative to rate of system change.

This is precisely what the Agile and Lean movements wants (OODA and PDCA loops). By reducing the delay (compared to Waterfall and comparable approaches) between doing something and getting feedback, they can adjust their processes and systems to meet customer demands more reliably. This is much more impactful than parameter changes (#12) which is: hire 10 more people, or give the best devs a 25% bonus. Those may help to motivate people, but they don't alter the fundamental system (ok, mass hiring can alter the fundamental system, but often not in the desired way).

On the other hand, introducing delays can stabilize a system. So reducing delays isn't the right choice for every circumstance.

Waterfall versus Agile is a useful and relatable example of different paradigms. Thanks for that.

The thing is that History doesn't like to drop green fruits, even beating the tree and strong wind, They only fall when they are mature and ripe to fall. You can add minerals and water in the soil around the tree, you can cut some leaves to let the sun directly hits the fruit, but no matter what stick you beat the tree or the wind is Hurricane, History doesn't like to drop fruits that are not mature and ripe.

> If this is correct, tax policy is a huge distraction, and if governments really want to jump-start growth they should be funding basic research, ensuring that the results are public (to their citizens, at least), and encouraging bright young people from across the world to immigrate to their jurisdictions.

Which could be accomplished by raising taxes.

Raising taxes, particularly in the US to pay for social services like healthcare and education would also have a huge effect on growth and productivity. It's not really the level of taxes that matters it's that you spend money on things that enabled people to pursue innovation/employement/art/etc and not get burnt out on administrative bullshit and constant stress from preventable things.

It's funny that the model we ended up with is that social activities of government can only be funded by budget-constrained financing where deficits are viewed with alarmism, with taxes not really causing strong growth/shrink effects.

On the other hand commercial activities can be funded via issuing currency through fractional reserve banking - causing national and global asset bubbles with periodic recessions and terrible effects on growth and productivity.

I think we need to move to different mental models of both to advance past our current economically induced problems.

> social activities of government can only be funded by budget-constrained financing

> commercial activities can be funded via issuing currency through fractional reserve banking

It's because the benefits of social activities cannot be captured and its value extracted. Commercial activity can - and therefore, there's motive for somebody to fund it to get richer.

Tax policy has a huge impact on growth. However what matters much more than quantity of tax is the quality of tax.

Money is public credit and varies in quality depending upon what it is secured by. Broad-based sales and payroll taxes are the worst possible quality of tax which undermine their own base. Sales taxes destroy commerce and payroll taxes which shift the tax burden from old savers onto young workers make it harder for families to afford having kids as early.

Land value and property income taxes are the best quality of tax, because the state simply confiscates a portion of the free lunch which would otherwise be privately captured by landlords, without discouraging any productive economic activity.

Louisiana is an example of a state with very poor tax "quality": low property tax, large property tax exemptions for businesses, and high sales taxes. It has negative real GDP growth per capita.

The public is frequently malinformed by experts as to what taxes are the best quality, because many tax 'reform' advocacy organizations actually advocate that the governments use the worst possible quality tax because they hypothesize that it will cause voters to advocate for lower government spending.

A large amount of Louisiana's employment is in resource extraction. Petroleum refining, petroleum, and coal products are the LA's largest exports. As a result, the drop in oil prices since 2014 have had a large effect on Louisiana's economy.

That said, I agree that property tax is probably the least bad tax.

Better is inflation.

Taxing pollution, instead of taxing productive activity, is a quality tax. Instead of spending money to combat pollution, people are incentivized to find solutions. Instead of punishing productive people to get government money, polluters are punished.

Pollution taxes can only work for post-industrial countries that are able to run on mostly service industry and import everything that requires manufacturing. As thus, they would be fine for most European countries but crappy for industrializing countries like India.

Even in a developing country like India or China, a pollution tax would be an effective (and lucrative) defense against opportunistic "race to the bottom" behavior. There are plenty of emerging industries, even in manufacturing, that don't depend on polluting the environment for their viability.

And the ones that do need to pay the cost of their actions. Taxing pollution means society can control the incentive tipping point to optimize cost-benefit.

> Tax policy has a huge impact on growth.

I don't think this is true except at very high levels of taxation.

The taxation styles and rates of the U.S. and the E.U have been wildly different for the last 40 years, but the growth rates have been very similar.

> If this is correct, tax policy is a huge distraction, and if governments really want to jump-start growth they should be funding basic research

... which requires taxes, which makes tax policy not a huge distraction.

... but much less than what any current government currently spends.

The entire DARPA budget is $3.44B this year, half as much as the wall that's currently shutting down our entire government, and less than 1/1000th of the total federal budget. The NSF gets $7.8B, a little more than the wall and about 1/500th of the budget. NASA gets $20B.

As I understood, estimates for that wall range between 25 and 75 billion USD depending on who you ask. And this being government contracts, it might very well balloon to 100 billion or more if you factor in surprises and corruption.

Other than that, I agree... NASA isn't getting enough funding. As are climate initiatives in the US. And the same goes for similar agencies and initiatives in the EU where I live.

I'm more skeptical about DARPA, but to their credit they're not just enablers of death; they're also working on some certifiably good stuff, like fighting human trafficking [1].

[1]: https://www.darpa.mil/program/memex

DARPA is IMHO one of the most ironic agencies on the planet: it's an organization whose fundamental purpose is evil (let's kill people better) that has managed to invent some of the best technological developments in history. The Internet, the GUI, time-sharing, TOR, and virtual reality are all DARPA-offshoots.

Wouldn't effective defense of a nation-state require putting resources behind projects that lead to "killing people better?" If so, would the purpose of effectively defending a nation-state be evil?

Yes. :-)

There are a lot of different ethical systems, but almost all of them consider killing people to be evil. Sometimes people quibble about whether killing people in self-defense or defense of others is evil, eg. "Would it be evil to go back in time and kill Hitler?" But note the asymmetry: it may be debatable whether killing Hitler is justified, but everyone save some very fringe movements believes that Hitler himself was evil.

We put up with nation-states because of survivorship bias. There are two kinds of people: those who live under the jurisdiction of a modern nation-state, and those who are now dead. From the surviving individual's POV, it's better to be the person for whom's benefit your country kills, than the person killed by them.

Consider the following hypothetical:

You're a female rape victim. The rapist broke into your house and performed said act. 6 months pass, and you decide to buy a gun (a glock, say) and take self-defense classes which include weapons training. You now stash the gun under your pillow at night, and you live alone.

Would effective self-defense (ostensibly, including the likelihood of killing a potential perpetrator) be evil?

I don't see how you get out of this puzzle.

The only thing I can think of is something like St. Augustine's argument that it can be sinful to do something, but still be a morally right act (or morally right thing to do). One of his points is that this is one of the perplexing aspects of the human condition.

But if we follow Augustine down this path, then we don't really end up with a conclusion that you wanted to drive at. You want to say putting resources behind a nation-state defending itself is evil, and is evil tout court. Augustine's argumentative path won't get you there.

Now, you could say individual self-defense is not the same as nation-state self-defense. That's fair. But, let's now walk our way down this path a bit. Is there a relevant and substantive difference between individual self-defense and the self-defense of a village of 50 native american indians soon to be snuffed out by Custer? How about 1,000? At what point do we say too many people in the collective ('nation-state') makes effective self-defense evil, in general.

I don't think that's accurate. Christianity, at least, forbids murder but not killing in general.

>There are a lot of different ethical systems, but almost all of them consider killing people to be evil.

This is too strong a claim.

You're evil. You'd rather Hitler rocks up and the Allied forces weren't able to defend because they didn't invest in military technology or have an army because that would be evil.

At some point you just have to get a grip on reality.

> NASA gets $20B.

Which is about 3.5 walls and about 1/200th of the budget.

> 3.5 walls

The $5.7B that Trump is asking for isn't enough to build the whole wall, it's just the amount he wants now. Cost estimates for the wall vary but they're all larger than $20B.

The silver lining is that $20B is still a tiny fraction of the cost for the Iraq war (a cost that one notable presidential candidate was historically quite comfortable with paying. No, I don't mean Bernie) That's progress, I guess!

Yeah instead we spent it on a 1.1T tax cut for the 1%.

Or borrowing foreign currency, or printing money, which does jump-start growth.

The idea that higher taxes would bring growth is weird, religious, and the opposite of what should happen. It's the same as the discredited Reinhoff-Rogoff debt-to-GDP paper searching for an invisible force that punishes irresponsibility; the "Invisible Dad" as it were.

Shifting taxes to people who consume with a lower proportion of their income (the rich) to people who spend a higher portion of their income (the poorer) is good; but raising taxes on the rich without transferring it to the poor (either in direct payments, employment, or structural improvements) has to mean that you're transferring it out of the country. It's an identity; using personal debt to pay down public debt.

Well, I think it is a matter of scale. It's not that tax policy isn't important, it's that the things people tend to change most easily are not as important as the things which are more difficult. When people say hyperbolic things about changes which are small in the grand scheme of things, it gives you the impression that nothing could matter as much as they're saying it does.

As for California in particular, I can tell you that their tax policy (along with all of their other policies, including firearms policy which is somehow more asinine than here in Canada, and their policy on corporate boards which is profoundly unjust) is a major turn-off for myself, and if you look at migration between states in the U.S, you'll find that a lot of other people feel the same way.

People aren't leaving California because of the weather, you know.

Your claim about California migration sounded biased to me, so I looked up the US census data [1].

  2010: -130,416 (net migration out of California)
  2011: -94,122
  2012: -73,864
  2013: -96,915
  2014: -79,892
  2015: -129,409
  2016: -142,932
  2017: -137,895

Compared to population [2], we get:

  2010: -0.35%
  2011: -0.25%
  2012: -0.19%
  2013: -0.25%
  2014: -0.21%
  2015: -0.33%
  2016: -0.36%
  2017: -0.35%

Conclusion: migration out did spike up starting in 2015. Now, what is it correlated with? You said it was due to taxes, firearms policy, and board policy.

Tax changes in 2014/2015: I didn't see any major tax changes [3].

Firearms policy changes in 2014: Long gun serial numbers required to be recorded on new sales. Police can confiscate guns from high-risk individuals for three weeks (signed in 2014, took effect in 2016). [4]

Firearms policy changes in 2015: Firearm Safety Certificate required for all guns (previously only required for handguns). [4]

Board policy change: Passed in 2018. [5]

My take: Migration out of California has increased, but it's not clear why. My personal guess would be cost of living.

[1] https://www.census.gov/data/tables/time-series/demo/geograph... [2] https://www.google.com/publicdata/explore?ds=kf7tgg1uo9ude_&... [3] http://www.library.ca.gov/Content/pdf/crb/reports/FinalVersi... [4] https://en.wikipedia.org/wiki/Gun_laws_in_California [5] https://www.wsj.com/articles/california-moves-to-mandate-fem...

It correlates well with housing prices:

https://www.zillow.com/ca/home-values/

2012 was the nadir of housing prices, and they've been rising rapidly since 2014.

California is losing lower income population(sub $55k) but it's being replaced at higher rates with higher income($200k+ income). For the economy of California, tax policy is a net benefit as higher income people generate more tax revenue and require less government aid. You could argue it has a negative social aspect as it pushes out lower-income families.

https://www.sandiegouniontribune.com/opinion/the-conversatio...

My point is that, taken together, the effects of many of California's policy decisions (which includes tax [which exacerbates people's displeasure with other policies, when they don't go well], which has been bad for a lot longer than just the decade you show) are compounding.

Cost of living is a huge one, but a large part of urban California's cost of living has to do with consumer and [metropolitan] housing policy. It is exceedingly difficult to get anything built in major Californian cities, and once you do have it, the conditions for keeping it are onerous. The various committees and authorities in the state seem to regularly produce unjust outcomes (even from reasonable policies) and don't seem to care when they do.

I think people are broadly willing to pay higher state and local taxes *as long as the services they receive function well, and the outcomes are reasonable.

> My point is that, taken together, the effects of many of California's policy decisions (which includes tax [which exacerbates people's displeasure with other policies, when they don't go well], which has been bad for a lot longer than just the decade you show) are compounding.

I understand your point, I just don't think you've provided the evidence to back it up. From where I'm sitting, it looks like you started with the conclusion ("I don't like CA policy") and then rationalized it from some personal experiences ("people like me are moving out of state"). [1]

California's population is increasing at the same rate as the US as a whole—about 1% per year—even after people leaving is taken into account. To put it another way, CA's population increases about 1.35% per year total, and about 0.35% move to other states. There's nothing particularly interesting going on with the migration numbers that I can see.

[1] Not implying that's what you said or actually think, just that it's what your thought process looks like to me.

> I understand your point, I just don't think you've provided the evidence to back it up. From where I'm sitting, it looks like you started with the conclusion ("I don't like CA policy") and then rationalized it from some personal experiences ("people like me are moving out of state"). [1]

I certainly did not provide much evidence to back anything up, you are right. I'm mainly just sharing my anecdotes: namely that I have made major life decisions based on the relation between tax policy in particular and policy more broadly, and the effect that that has on quality of life.

I do take a bit of issue with the implication that because no particular correlation exists between policies of the last eight years and emigration, that there is no measurable relationship between emigration and policy. I know in the most concrete sense that there are at least a handful of people who primarily justify their choice to avoid or leave California in terms of the direct or proximate impact of policy (and the cost of that undesirable policy in terms of taxes).

The problem with drawing conclusions between emigration & policy is that it ignores the other side of the coin: immigration. There are a number of people who come to California specifically because it embraces the policies you hate: high taxes (with high social services) and gun control. For any large & reasonably controversial issue, the sides balance out, and the net effect on migration is due to more fundamental issues like the availability of jobs & housing (and, of course, the ability to migrate in the first place).

The cause of migration (if it is a fact and not random coincidence) is the result of many different long term things. Changes as fast back as 1990 might be the cause of the current migration. It sometimes takes that long for things to work through the system.

FYI, this is only domestic migration. Overall, California’s population is actually growing

> My take: Migration out of California has increased, but it's not clear why. My personal guess would be cost of living.

Understanding "why" also requires looking at where people are migrating to and why. Quite possible that the destination affects the numbers, especially if it's consistently a common destination, more than the source.

In 2012 there was a significant increase in income and sales taxes which were phased in over several years: https://en.m.wikipedia.org/wiki/2012_California_Proposition_...

California’s population actually increased by 2 million in the last decade contrary to popular myths

Perhaps I'm just naive with regards to tax policy, but the idea of raising or lowering taxes in order to drive growth always seemed strange to me. I've always taxes were a way to fund a functioning government and pay for all the common infrastructure and services that make life pleasant. If you have excellent public schools, and well-maintained roads, and an efficient governing body, wouldn't that be a place ripe for growth, regardless of tax rate?

More money spent on government projects does not guarantee a proportionally greater benefit, and comes at the expense of other factors which are necessary for growth, such as private investment. Most of the things a healthy economy needs do not come from government and are not paid for via taxes.

As a simple counter-example, let's say 100% of income were taxed and spent on the best educational and transportation systems money can buy. You'd have excellent schools and the best roads, but zero incentive for anyone to work, much less start a business. The capital needed to produce the goods people want would be consumed without replacement. That's a recipe for economic collapse, not growth.

The response to both dramatically increased taxes (as in South Korea), and dramatically decreased taxes (as in Kansas and the US), would seem to point to the fact that taxes as they affect growth mostly don't matter.

It is. Most of the places where people live and work are higher tax places.

The lowest tax places are usually places dominated the lowest value-add businesses -- like resource extraction. They don't really care about people because they don't need them.

It’s not really a comparable situation. US states compete for resources within a national economy. South Korea is a national economy. And California and Kansas differ in many ways other than tax rates. California’s high state taxes are a mechanism for monetizing California’s other economic advantages to fund their state government, while lower state taxes in states like Kansas are a mechanism for attempting to compensate for their other economic disadvantages.

The mistake is in focusing obsessively on any one variable rather than addressing the entire system. California is definitely economically worse off in some ways than alternate-universe-low-tax California, but in exchange they have more tax revenue and hence potentially better schools and highways. It’s all tradeoffs and matters of degree. Confiscatory 90%+ income tax rates were not sustainable after the immediate postwar era, and might have even been a bad idea at the time, but it doesn’t make sense to overreact to that mistake when it’s long been fixed and there are more obvious bottlenecks.

I agree. I used to live in a shitty city, filled with pollution, rather expensive, bad roads, high crime rates, etc... For various reasons, the central government decided (that was like 15 years ago), to invest in another city that is 130km from the said city. It invested in infrastructure, schools, cleanliness and tourism. 15 years later, the clean city is practically a ghost town. The shitty city is shittier but it has gone through an economical and population boom.

Turns out, people from the shitty city were more successful on average; and they decided to stay where their families are. People from the nearby cities didn't decide to move to the shitty one but did so because that's where jobs are.

If there is anything that I learned by traveling cities:

1. Jobs matter. More than you think. They are what attract people to a city.

2. Family relations matter. More than you think. It seems it is what attract people back and make them invest their life savings in a house, small business, etc...

>Growth is driven by other factors, like when a brilliant but insufferable physicist moves back home to be close to his mother [2], and is a function of individual(.)

This is true in the short term as the individuals already exist and their prior experience is already locked in. The long term problem is that of failure to create a new generation of high performing individuals, either through a collapse in birthrates (already underway for at least 1 full generation) or a failure to entice high potential individuals to participate in meaningful endeavors (arguably happening right now). Humans have a defined lifespan and their life trajectory is largely determined by outside factors even if their potential isn't.

>"It's interesting to see contrasting articles on taxes & growth. There's this article about how South Korea raised taxes in a bid to grow faster and failed, but there are also plenty of articles about how Kansas's attempt to lower taxes in a bid to grow faster also failed [1], as well as predictions that California's high taxes would hamper growth (which hasn't really happened yet)."

Should this be surprising? I thought that was pretty much what the laffer curve was about: https://en.wikipedia.org/wiki/Laffer_curve

Economics is, as the first economist for Google put it, "intellectual prostitution". You can justify any policy with the right amount of jargon. The interesting bit isn't really the economics but the moral assumptions behind it. To tax or to not tax the rich, to raise the minimum wage, to redistribute wealth, are all moral issues. And nothing gets people more riled up than differing moral opinions

economy is a clusterfuck of causality. trying to find what caused something is super hard

in this case, the correct conclusion is probably "it's too early to tell". economies can take a while to equilibriate, and the article mention a 1-year timeframe from which they draw their conclusion.

i'd also guess that south korea, while more developed than many countries, is not quite developed enough to extract surplus value from the various value chains its economy participates in. that would matter because their businesses would have less profit leeway to absorb costs like a higher minimum wage in the short term.

Agreed, tax policy overall is just an ineffective lever for growth. It may help on the margins (tax break to build a factory, tax break on electric cars, tax increase to fund national health and education programs) but it doesn't spur the fundamental earth shaking innovation that advanced economies need to grow at a clip above 2-3%.

Very different to compare a country’s policy versus a state in the context of a country with a much larger % share of taxes.

To your point - other things matter too: access to great engineering schools that are open to professors moonlighting, flexibility of labor and capital, etc.

The reason for the contradictory findings is that tax rates are one of what, hundreds or thousands of variables to economic output?

It shouldn’t be surprising that a change in tax rate can be overpowered by other factors.

> What if the actual conclusion is that it just doesn't matter.

You're probably right with respect to growth.

Other commenters are going to glibly point out that you need taxes to pay for basic research or whatever. Yeah, I think they miss the point too.

If the country wanted to, it could not raise a single tax dollar and 10x its research spending. A country isn't a household, its balance sheet can have debt permanently, etc. etc.

No, I think taxes matter for justice and equality. And the whole reason cost effectiveness entered our debate is that rich people, like you're correctly pointing out, have opinions, and tax policy is a consequence of that.

But if overall rich people are aligned against higher taxes, which is the case in history most of the time, they're effectively aligned against equality and justice.

And save me the downvotes if you don't understand how property taxes, for example, that differ between neighborhoods, can be about justice as much as they are about funding school districts.

Or that the healthcare mandate was absolutely about justice, and that calling it a tax was a workaround precisely for the reasons I described: that we've become obsessed with positivist or legalistic (instead of normative) dialogue, so it was the only way to get ACA passed.

I love tax policy on HN, because it really brings out of the woodwork people who do care about what's good for the country, and people who don't.

Would you please not use HN for ideological battle? It's not what this site is for. Discussions like this are predictable, therefore off topic here. And get more tedious and nasty as they go along.

https://news.ycombinator.com/newsguidelines.html

I don't necessarily disagree, but I want to point out a charitable interpretation of the opposing viewpoint, which is that tax redistribution protects people from the consequences of their own decisions and incentivizes bad behavior.

Under this viewpoint, parents who manage to afford to live in a wealthy neighborhood and send their kids to good schools have sacrificed a lot - in continued education, in long work hours, and in taking careers that are in-demand rather than ones that might be prestigious or enjoyable - for that privilege. It's unjust to take their sacrifice away from them and give it to folks who dropped out of college and spent their 20s playing video games, just because the latter group is now reaping the consequences of their decisions. Moreover, it means that now there is no reason to study & work hard and go into professions that people will pay a lot for, because your money is just going to go to people who don't.

Whether you hold this viewpoint or your "taxes = justice" viewpoint hinges a lot on the factual question of whether you believe that one's station in life is primarily due to outside factors or whether it's due to your own actions. I suspect you'd find very strong correlations between the former worldview & Democratic political preferences and the latter with Republican political preferences, though obviously it won't be 100%. Personally I think it's a little of both, so I tend to identify as a moderate. But I'll point out that this worldview, on a societal level, is itself self-fulfilling: if most of the society believes it, they create a redistributive welfare state, which means that your success is dependent upon outside factors, which then justifies the original belief in the first place. While if most of the society disbelieves it, they create a cutthroat individualist economy, which highly incentivizes individuals to make decisions that will put them on top, which means your success is dependent upon your own actions, which then justifies the original belief in the first place.

To muddy the waters further, when a society with a cutthroat individualist economy encounters a redistributive welfare state, the former has a tendency to conquer the latter. After all, it's their own damn fault that they've coddled their weak and have no strong leaders that can lead the fight. So the latter type of society tends to fall into irrelevance or disappear even if the majority of people involved would actually prefer it.

That last part is a good summary of companies going at it. The incumbent with crushing pension liability, bureaucracy, or rent seeking getting wiped out by a cutthroat competitor.

Raising tax rates has nothing to do with making the rich pay their fair share. The countries with the highest tax rates have the least progressive tax systems even in terms of income rate bands. Trying to tax the rich doesn't work because it is either a) unworkable or b) dramatically harms investment. Scandinavian countries both have high income tax rates in general and large (regressive I might add) taxation on goods and services precisely because the rich are not actually paying for government expenditures.

Countries with higher taxes have made a different tradeoff about the cost of taxation( borne mostly by the middle class) compared to the benefits of large fiscal outlays by the government.

>> I love tax policy on HN, because it really brings out of the woodwork people who do care about what's good for the country, and people who don't.

Maybe instead of arguing about tax policy using canards you could come up with a coherent argument based on actual policy outcomes?

> A country isn't a household, its balance sheet can have debt permanently, etc. etc.

> I think taxes matter for justice and equality

Thank you for saying this. I wish the president of my country (which is not the US!) understood this. And that running a country is also not like running a business.

> But if overall rich people are aligned against higher taxes, which is the case in history most of the time, they're effectively aligned against equality and justice.

> I love tax policy on HN, because it really brings out of the woodwork people who do care about what's good for the country, and people who don't.

What's the point of discussing this with you? Here, I'll try:

But if overall poor people are aligned for higher taxes, which is the case in history most of the time, they're effectively aligned against doing work and freedom.

> A country isn't a household, its balance sheet can have debt permanently, etc. etc.

Is that really different than a household?

The problem with a debt isn't that you have to pay it off. Actually, your creditors were prefer that you didn't and instead pay them interest until the day you die after which they'll collect the debt from your estate.

The problem with debt is that you have to pay interest all of the time. Countries with debt are necessarily purchasing less goods and services for their citizens then if they didn't have to spend some portion of their income paying the interest.

So, the fundamental reason why it's better (all else being equal) to avoid being in debt is the same in either case. Its not about the future day when you'll have to pay the debt, it is interest you are paying now.

The difference is that a country isn't a person with its own wants that it's presumably satisfying with its purchase. When a country pays interest, it is effectively transferring money from its taxpayers to its bondholders. Very often, the bondholders are other parts of the government (28% of US government debt), private citizens (32%), or the Federal Reserve (11.2%). If the U.S. government has less money with which to purchase goods and services, it just means the private sector has more money with which to purchase goods and services, which in many cases is what you want.

There was some concern about China being a large holder of U.S. treasuries a decade or so ago, but that concern has abated as China has unpegged their currency and unwound some of their treasury holdings, and because the debt is denominated in U.S. dollars and so the U.S. government could always inflate it away to nothing if China tried anything funky. The "bad consequences" of the U.S. <=> China current-account deficit have largely already come home to roost - that's what's fueling the rise in real estate prices bought by Chinese investors which is making homes unaffordable for Americans in west coast states.

The household analogy would be an adult child who pays rent to live in their parents' basement, which the parent may either spend on the child or plans to return to them via inheritance when the parent dies. Sure, you're spending money, and sure, it means that you have less money for spending on other things. However, it just means that other people closely associated with you spend that money instead, and if they don't, it comes back to you anyway.

You analogy makes no sense to me.

I presume that the parent is the government and the adult child is the citizen. That would suggest that the rent is taxes. But that would leave there being no debt in the analogy which would rather defeat the point of it. So I have no clue how this is supposed to work.

> I think taxes matter for justice and equality.

There is nothing inherently just or equal about coming with guns to people and taking a percentage of their earned resources.

> I love tax policy on HN, because it really brings out of the woodwork people who do care about what's good for the country, and people who don't.

And I love it because it brings out holier-than-thou virtue signalers, who think that they know better than everyone how to spend other people's resources, while denigrating their contributions.

The road to hell is paved with good intentions. "Caring about what's good for the country" is not nearly enough to be able to bring positive change even to a subset of people in the country. But it does bring some virtual internet points, I concede that.

Would you please not post ideological battle comments or flamewar comments to HN? This is what we're trying to avoid here.

https://news.ycombinator.com/newsguidelines.html

>There is nothing inherently just or equal about coming with guns to people and taking a percentage of their earned resources.

There's nothing just about people believing they "earned" those resources by their hard work alone, and not understanding that there were huge infrastructure costs that enabled them not just to do the work and earn money, but even to stay alive -- and that they have to pay to sustain it.

From the roads their cars (and they suppliers and customers cars) drive on, to the airports, to the government funded internet (from the research of ARPANET, to CERN (www), to the trillions spent subsidizing telcos), to the primary schools and high schools they went to, to the fire department that helps them to avoid burning when their houses catch fire, from the FDA and relevant law enforcement that helps them avoid dying from the first crook wanting to sell crap as food or medicine, to the contract laws and their enforcement that help them stay in business, to the criminal laws and their enforcement that protect them from being at the mercy of anyone who'd fancy killing them, from the military that prevents them from being the subjects or prisoners or sex slaves of some foreign power that wanted to expand, and on and on...

It would only be _just_ their "earned resources" if they made them in the jungle, hunting or growing their food alone.

It might be a two-sided transaction, but we don't really have a choice, do we?

If we knew then what we know now, maybe people wouldn't have wanted the government to subsidize the automobile by creating our road system's infrastructure. Hey, maybe people won't even want the internet in another twenty years. And I know for a fact that plenty of people in the US don't appreciate the way law enforcement keeps them "safe". Same for the military.

I find this whole, "let me laundry-list things the government does, many of which it didn't really ask for permission to serve, as a justification for its existence," to be a fairly empty excuse for taxation. I appreciate what I get on some level, but I recognize that the government isn't 100% perfect and that my successes aren't that dependent on, say, my high school guidance counselor.

>It might be a two-sided transaction, but we don't really have a choice, do we?

We don't have a choice with any LAW. It's what the society has decided, with the means the society has to decide things (elections, and so on).

>I find this whole, "let me laundry-list things the government does, many of which it didn't really ask for permission to serve, as a justification for its existence"

That's what elections are for -- and even more so, active participation in politics every day (including with violent protests when it calls for it).

If the population hardly deserves the title of "citizen" (active participant in the politics of the polis), and just casts a vote every 4 years (if that), then they don't get to complain that they pay more taxes than they want, or the government does X which they don't want.

The exception being if there's a tyrannical government, or opaque procedures out of their reach, or the control has been shifted away from their reach and they're e.g. a protectorate (which also can happen).

You are really fast in switching the discussion from “taxes should be used to as a wealth redistribution scheme” to “hey it’s kind of like paying for the resources you might have used”. I am all for paying taxes that fund the public goods, but half of the things you’ve mentioned are not them. And most certainly this is not what’s being advocated by the proponents of the “justice and equity”.

>I am all for paying taxes that fund the public goods, but half of the things you’ve mentioned are not them

Which half exactly?

>And most certainly this is not what’s being advocated by the proponents of the “justice and equity”.

Well, I'm one of the proponents of “justice and equity”, and this is what I'm advocating (among other things). If you make more money, you also take more advantage of these infrastructures (someone who makes $10/hour flipping burgers doesn't depend on those infrastructure as much as someone making millions running a company whose operations crucially depend upon all those things being present).

Can you suggest an alternative way to fix the negative effects of inequality?

Can you describe your desired outcome? Do you want almost everyone to be relatively “equal” like in the late USSR or current North Korea? If not then I guess “inequality” is not the thing you need to look at.

That's why I said fixing the effects of inequality, not necessarily fixing inequality. What I mean by that is things like unequal access to the courts (the average person doesn't have the resources to fight a corporation that wrongs them), problems with campaign finance, and the unavailability of affordable housing in much of the country.

Basically I feel that a person who puts in a reasonable effort (spends 45 to 55 hours a week working, commuting, learning skills, and/or looking for work) should be able to generally live the American Dream which I would define as something along the lines of owning a house, providing for your needs, raising a family, improving yourself, participating in culture, and generally having the freedom to choose your lifestyle.

When I say choose your lifestyle, I don't mean that everyone can become a rockstar or drive a Ferrari. Rather I mean things like: Do I want to live in the city or the country? Is it important to me to live near people that share my religion or culture? Is living near my parents important? Am I a Southerner, a Yankee, or a Texan? Do I want to live the mainstream American lifestyle or be more of a hippy?

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