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Comment by rahimnathwani | Hacker News Reader

The paper talks about economic growth, income distribution and unemployment.

I'm mostly interested in economic growth, so looked at what the paper claimed about that.

It found that major, sudden reductions in taxes on the rich did not have any statistically significant effect on the trajectory of economic growth over the following five years.

But:

- Their sample is small. They only looked at relatively large, discrete declines in their home-grown measure of taxes on the rich. They did not look at all tax-rate changes.

- They did not look at effects beyond the five-year horizon, which means it would probably exclude the impact on people starting startups, as the successful ones usually take more than 5 years to start making serious money. (or did during the period the paper considered, even if timelines have subsequently accelerated.)

- Big sudden tax cuts don't happen in a vacuum, and I don't see a way to control for confounding.

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Just look at growth rates before Reagan/Thatcher in the US/UK and after. If you take the 30 years before and the 30 years after, you'll see growth actually decreased.

Obviously this is correlation, but it's somewhat damning to the conservative gospel (dogma?) that lowering taxes somehow automatically produces more growth.

Given that we have no clear indicator that raising taxes on wealthy people would reduce growth (really, we have the opposite signal from the historical record), there seems little reason not to pursue greater equality.

In most rich countries, the % of income people pay already goes up with income.

When you say 'pursue greater equality' do you mean we should keep making the tax system more progressive until everyone's after tax income is equal? If not, what should the shape of the curve be?

> In most rich countries, the % of income people pay already goes up with income.

Right. But rich people don't have income, so they don't pay any taxes. Our tax code is not progressive at the top. It is progressive for income at the top, but income != accumulation of wealth in a year. Bezos can make $10B in a year and pay $0 tax. In fact he has done literally that for many years. Under the current tax code, he can effectively actually never pay taxes ever.

So at the very least we should have a progressive tax code for everyone. I think that's not controversial?

As for trying to rebalance wealth, that's a broader discussion. It's pretty clear though that the current system will continue to concentrate wealth into the hands of fewer and fewer people, until the general population either rebels or becomes effectively peasants. I mean if the growth rate is 2% and capital returns 5% a year.. eventually you're going to get all the assets concentrated in the 0.0001%.

The question I have is that at some point X taxes are collected and the economy is growing at Y, then the policies change and now X-5 taxes are collected and the economy grows at Y. What was the function of the 5 under the first regime?

Slowing the growth of the country’s debt. Some would argue this gives flexibility to expand that debt during crises like wars, economic events, or pandemics; by “keeping powder dry” in terms of debt to GDP.

Are you thinking specifically of the US or you thinking of all the countries that were part of the data they reviewed? Also, how does leaving the wealth in the hands of citizens prevent it from being taxed in the future if needs be?

I’m thinking specifically of the US, but I don’t see why the same argument wouldn’t apply to most countries. There’s going to be differences when you get to weird economies like North Korea, but still.

Not taxing the citizens now gives you more room to tax them in the future. Or looking at it another way, cutting those currently implemented taxes can act as a stimulus for the economy, although one with poor measurability compared to other types of stimulus.

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