Last week, I was surprised by an unusually disingenuous article by Greg Mankiw in the Sunday NYT column "“ "I Can Afford Higher Taxes. But They'll Make Me Work Less."
As I read it, I was struck how disconnected it was from the real world. I have been meaning to get to it, but the Fraudclosure issue pushed everything else aside.
I suggest you read Professor Mankiw’s piece, then come back here to consider the following questions..
Ten Many Questions for Greg Mankiw
1. Taxes were higher in 1990s then they were in the 2000s. Yet you left the lucrative private sector for a low paying job in the public sector. Why?
2. Which decade did you work more — the 1980s, 1990s, or 2000s ? How much of your work decisions were driven by marginal tax rates?
3. The article you wrote claimed you regularly turn down most job offers.
a. Do incentives not matter to you? b. Are you a rational economic participant? c. Are you motivated by maximizing income? Do other non financial factors weight significantly in your thought process?
4. You have a variety of income streams "“ speeches, textbooks, articles, etc. "“ yet you discuss tax consequences as if you were paying ordinary payroll income tax. Are you unfamiliar with the benefits of incorporation? Do you have an accountant or an attorney advising you on these matters?
5. You teach at Harvard and live in "Taxachusetts." If state taxes are so important, have you considered teaching at Yale, and living in much lower state tax land of Connecticut?
6. You mentioned a stock that will generate 8% annual returns over the next 30 years. What stock is it?
7. You also stated the aforementioned mythical company pays 35% income tax. Is this company unlike most large S&P500 firms that generate more than half of their net profits overseas, then leave the monies there, giving them an effective tax rate around 10% ?
8. Are you unfamiliar with the benefits of 401ks and KEOGH plans that allow you to invest your pre-tax income? Do you know about matching contributions to retirement plans?
9. Why did you claim your heirs will have to pay estate taxes — Is your estate going to be greater than $7 million dollars? If it is > $7m, are you familiar with term life insurance?
10. You were Chairman of the CEA in George Bush' White House. His administration passed the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. These tax cuts were unfunded by offsetting spending cuts. Indeed, his administration ran up spending dramatically.
Since you seem to be fond of making projections 30 years into the future, my final questions for you are: What will the total costs of those tax cuts be, projected out 30 years be? How about the costs of those spending increases? Indeed, what will be the total cost of that White House projected 3 decades into the future?
And, what will the final bill for these be for your children? How might THAT affect their decisions?
Thank you for your answers to these questions.
And if you need a good accountant, insurance man and lawyer, let me know — I can recommend quite a few.
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Source: I Can Afford Higher Taxes. But They'll Make Me Work Less N. GREGORY MANKIW NYT October 9, 2010 http://www.nytimes.com/2010/10/10/business/economy/10view.html
Your questions may provide great incentives for Professor Mankiw to write more books. He really should get on that project right away because, if for no other reason, the offerings in economics and finance at Goodwill have been thin of late.
But seriously… threats to go Galt sound so hollow anymore. As for Mankiw’s threat: Go ahead. Working less might help reverse the spurious assertions from thirty years of public policy that revolves around supply-side economics.
Good questions.
What a riot! Hope this one on Mankiw goes viral fast.
Good post, Barry. Your BS detection meter has been spot on of late.
Brilliant, BR! Dear Mr. Mankiw: How about some responses, please?
These people can’t even lie that well, even with all of their training over the years.
I would also venture to guess that if some of these clowns “go Galt” and stop working, our economy and country might be better off. Addition by subtraction. By all means fellas, go ahead.
I'm not sure what the Mankiw article take away is (laments of an elitist Harvard Republican), or the Ritholtz reply (the soapbox of a moderate Wall Street Democrat Independent). Both address the future of individuals in an uncertain, over taxed, under regulated, dynamic economy with unfettered government spending and taxing (Federal, State and Local).
The real message is that the U.S. needs coordinated study and planning. The individual is prostrate under a mountain of public debt, economic uncertainty, and dire predictions of gloom and doom from all sides.
The only logical outcome of Mankiw-Ritholtz arguments is to move immediately to Hong Kong, where a 10% one-time tax finishes your entire external obligation, and enjoy life.
The Gingrich Republicans succeeded with a "Contract for America". It was a contract with loopholes, a lousy plan on careful reading, but a plan never-the-less. America gave 1994 Republicans the votes they needed and a chance to do something America wanted, shrink government, lower taxes, and promote entrepreneurs. A contract they promptly forgot and fouled up.
Every business runs on a plan, the country should too. Make a plan, stick with it, and adjust it periodically. Include every cost and implication that falls on individual Americans. And implement the plan. Then an individual would know what's coming and can adjust accordingly, or not. In any case the individual would be responsible for his or her own fate, not wiped out by an off balance sheet Bush Mideast Crusade, a failed Democrat socialist state, or cutesy California largesse by committee.
“Last week, I was surprised by an…article by Greg Mankiw in the Sunday NYT column "“ "I Can Afford Higher Taxes. But They'll Make Me Work Less."
As I read it, I was struck how disconnected it was from the real world.” BR(edited), above
BR,
Did you miss the Memo?
it’s been circulating for quite awhile..as http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Mankiw+is+a+Hack will lead to..
LSS: this, “by Greg Mankiw”, was all one had to see to See.. ~~
Also, here’s another one that’ll lay heavy odds that ol’ Greg will not proffer any, direct, Answers to your Q:s..
People like Mr. Mankiw worry me about the future of our country. The incentive is no longer to benefit society and improve our once great country. We only worry about ourselves and how much money we need to have to feel happy. Our population suffers from the belief that our standard of living should be ever increasing (not unlike those who believed RE prices would forever increase a few years back) yet our work ethic seems to be disappearing. Is our country the next big bubble to burst? Has it already burst?. We need taxes now more than ever with our infrastructure and educational systems decaying at alarming rates and now to reduce the gigantic deficits created by our insatiable greed. It is time for this country to suck it up like our ancestors did and pull ourselves out from this hole we’ve dug for ourselves.
Last week I wrote a similar reply to this same article by Mankiw, except I focused more on his assumption that nobody would step in to fill his shoes. relevant section below…
I’m sure that there is plenty of unemployed or underemployed economists who would be happy to take that work Greg doesn’t really want, many of which are probably adequately qualified, even if they lack his reputation. To Greg’s possible substitutes that fall under a lesser marginal tax-rate, this same work would yield more savings, meaning they’d be more willing to take on that extra work even if their supply curves are identical. Those who are less financially comfortable and are more willing to sell their labor may be willing to provide the same services for the lesser compensation they might be offered as a result of lacking Greg’s name-recognition. So my final comment to Greg is that it may be worth considering that maybe this is not so much about “how much the government should redistribute income” but about how much government should redistribute the opportunity to work. And right now, Greg, there is plenty of us that would be perfectly willing to provide our services for both income, and the opportunity to create a name for ourselves so that one day we too can turn down jobs because, after taxes, they don’t pay that much.
Regarding question #1, I think that academic economists have a lot to gain financially, in the long run, by taking a high-level, high profile position in government. But I also think that, as a general proposition, the work output of tenured professors changes very little with changes in marginal tax rates.
Regarding question #2, I don't know what the answer is in Mankiw's case, but for an academic generally, the #1 priority above all else is getting tenure. The #2 priority is making it to full professor; then once there, it's usually a matter of gaining notoriety for academic contributions to his field.
Regarding question #3, I think that one of the points is that among the various responses that people will exhibit in response to higher taxes (but not the only one) is the decision to value leisure more than work. If my own income were in the range of $250K-$275K (it's nowhere near that), I would absolutely cut back to $249K in response to a higher marginal tax rate.
Regarding question #4, if Mankiw were to set up a subchapter-S corporation, he would still have to pay taxes; the incentive issues would remain.
Regarding question #8, I would assume that Mankiw is "maxed out" on his 401K.
Regarding point #10, every dollar we give to the politicians, they will spend, and then some. Regardless of what the tax burden may be, we're just going to keep piling on debt until the bond market collapses.
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