Network News

X My Profile
View More Activity

Think tank: Taxes, parking and lawsuits

1) The Center for Budget and Policy Priorities rounds up 10 facts about Social Security's current condition and future trajectory.

2) François Gourio and Jianjun Miao find that temporary cuts in dividend and capital gains taxes actually lead to a a drop in investment.

3) Emmanuel Saez, Joel Slemrod and Seth Giertz examine how incomes react to different tax rates.

4) Health-care reform does very little about medical malpractice.

5) A Powerpoint showing the high cost of free parking.

By Ezra Klein  |  August 16, 2010; 2:06 PM ET
Categories:  Think Tank  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: 'A much more terrifying place'
Next: Summers for CEA?

Comments

That "how incomes react to different tax rates" link leads to a research piece on how to cut the defense budget.

Posted by: bgmma50 | August 16, 2010 2:16 PM | Report abuse

"2) François Gourio and Jianjun Miao find that temporary cuts in dividend and capital gains taxes actually lead to a drop in investment."

Investments are long-term in nature. The temporary tax cut provides an excellent window to realize gains from past years. At the same time, the attractiveness of long-term investment has not changed because tax rates are expected to revert to the prior level.

Posted by: justin84 | August 16, 2010 3:30 PM | Report abuse

@Justin84:

So you would agree that a good way to spur investment and business growth would be to pass a temporary, maybe 15-year hike in cap gains/dividend rates.

Posted by: eggnogfool | August 16, 2010 4:11 PM | Report abuse

This analysis of the "high cost of free parking" is as BS as Yglesias' occasional diatribes.

First of all, it makes the specious (but apparently universal) claim that everyone except the motorist pays for free parking. As far as I am aware, motorists are not exempt from taxation, nor are they entitled to discounted prices for goods and services. They pay just like everyone else.

Second, it assumes that free parking simply changes the balance among transportation mode choices -- people choose to use less public transit. This ignores the fact that anywhere outside NYC and DC (the only places where the Federal government seems to be aware of the need to subsidize commuter rail), public transit is seriously dysfunctional. Here in Atlanta, it is little more than a feeder system for the airport and even in that case only goes in 4 distinct directions. I used to live several miles from a station and would drive to the park and ride and commute in on the train. I stopped that when they converted the park and ride lot to long term airport parking.

Third, as with all of these "analyses," the economic impact of available parking is not a feature. It is assumed that the price of parking affects only traffic congestion, spending on roads and lots, and public transit. But people don't drive to be driving. They drive to go to work. They drive to go to the store or restaurant and buy something. Make it inconvenient to reach and people won't go there any more. There follows economic decline, loss of jobs, and urban blight.

Fourth, the logical endpoint of this line of argument is clear. Sidewalks cost money. Bike lanes cost money. Public transit costs money. There's no reason these should be subsidized either. Cyclists should pay a heavy tax for the construction and maintenance of their bike lanes, and pedestrians for their sidewalks.

My point is not that free parking is unalloyed good. It is rather that this particular argument is overly simplistic and ignores significant economic and infrastructure factors. Yglesias is addicted to this because he is a bike bigot. What's your excuse?

Posted by: pj_camp | August 16, 2010 4:42 PM | Report abuse

"So you would agree that a good way to spur investment and business growth would be to pass a temporary, maybe 15-year hike in cap gains/dividend rates."

Um, no, I wouldn't. I would agree a good way to spur investment and business growth is to permanently keep direct taxes on capital as low as possible.

http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3544

Posted by: justin84 | August 16, 2010 6:27 PM | Report abuse

"Fact #10: Social Security can pay full benefits through 2037 without any changes, and relatively modest changes would place the program on a sound financial footing for 75 years and beyond."

Just how do you project ANY population related metric out 75 tears when, essentially, virtually no-one who will be alive then has even been born?

The only people now alive who make that 75 year life span will be the portion that exceeds average life expectancy.

The prediction to 2037 actually projects past the baby boom generation, and doesn't appear to consider the fact that the GENX cohort is actually a statistical sag in population figures, so that there will be on average MORE payers to payees during that period of time, say through 2060.

So let's get real and stop producing doomsday scenaria for situations that are totally beyond rational prediction.

Posted by: ceflynline | August 16, 2010 9:46 PM | Report abuse

"Um, no, I wouldn't. I would agree a good way to spur investment and business growth is to permanently keep direct taxes on capital as low as possible."

Agree with who? They don't claim that, they argue that taxes on capital 'distort' the market. And as we've discussed, and you agreed with the paper linked in the Ezra's post above, that 'distortion' materializes in the form of increased investment and employment.

Posted by: eggnogfool | August 17, 2010 7:47 AM | Report abuse

"Agree with who? They don't claim that, they argue that taxes on capital 'distort' the market."

I would agree with the claim that low and permanent capital taxes are a plus for investment.

Yes, taxes on capital distort the market. Therefore they should be as low as possible, and they shouldn't fluctuate. The authors note in the abstract that:

"...when the dividend and capital gains tax cuts are unexpected and permanent, dividend payments, equity issuance, and aggregate investment rise immediately."

and they also note that temporary cuts aren't effective:

"By contrast, when these tax cuts are unexpected and temporary, aggregate investment falls in the short run. This fall allows firms to distribute large dividends initially in response to the temporary dividend tax cut."

The paper isn't freely available but I would guess that the difference is that people take advantage of rate fluctuations to minimize their tax burden, which in the short run means investments are cashed out when rates are low. With a permanent cut, the incentive to game the tax code under a temporary cut disappears but the incentive to direct more resources to investment remains.

Raising rates temporarily might tie up capital for awhile (which isn't necessarily a good thing), but new investment will certainly be lower until we get close to the expiration date. There is also a decent chance we'd see less federal revenue as losses are recognized under the high tax regime whereas people will hold onto their gains until taxes fall.

Posted by: justin84 | August 17, 2010 9:57 AM | Report abuse

Post a Comment

We encourage users to analyze, comment on and even challenge washingtonpost.com's articles, blogs, reviews and multimedia features.

User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions.




characters remaining

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company