In case you somehow missed it, here's a recap of DeLong versus Mankiw on whether taxes have become more progressive since the Bush administration took over, a topic also addressed here and at Angry Bear. All of this is in response to a commentary in the WSJ by Lazear and Baicker. There is also a reminder at the end not to forget about the counterargument to another claim made in the commentary about the role of education in explaining the growing income gap:
|Mankiw Post:||DeLong Response:|
Framing and Progressivity
CEA op-ed, the sentence that will likely generate a blogosphere debate with
the most heat and least light is this one: "The president's tax cuts have made
the tax code more progressive."
It is impossible to say on purely economic grounds which of these perspectives is better. All of these statements are mathematically correct, even if they leave the reader with very different impressions. If you are a politician or a journalist trying to argue that this tax cut is good for the rich, good for the poor, or somewhere in between, you can do it!
The lesson: Be careful when you read debate about the progressivity of the recent tax changes. The conclusions that a commentator reaches depends on how the issue is framed.
Recent Tax and Income Trends among High-Income Taxpayers
Edward Lazear and Katherine Baicker say:
Last month, Joel Friedman, Isaac Shapiro, and Robert Greenstein said:
Friedman, Shapiro, and Greenstein are right. Lazear and Baicker are wrong. You can redefine "progressive" in such a way that there are tax cuts which increase after-tax income differentials that are "progressive"--the same way that when Alfred Kahn was working for Carter he redefined "banana" to mean "recession." But you cannot argue that the president's tax cuts have narrowed after-tax earnings differentials. No way. No how.
|DeLong Post:||Mankiw Response:|
Jane Galt Says George W. Bush Is a Leveling, Redistributionist Mole!
Jane Galt says that the Bush tax cut will, in the end, be progressive:
The argument that a tax cut for the rich is ultimately progressive because it runs up the deficit and creates a political backlash that ultimately leads to bigger tax increases for the rich than the tax cut--that is not one I've heard before. Yet it does have a certain plausibility, now that I think about it.
George W. Bush, redistributionist mole!
The Progressivity of Budget Deficits
have been debating
my previous post on evaluating tax progressivity, focusing on the fact that
deficit-financed tax cuts require lower spending or higher taxes in the future.
Let me add to the discussion:
With all the focus on progressivity, it might be useful to point out once again that there is a second part of the editorial to ask questions about, the claim that the education gap caused the income and wealth gap, and hence that education is the solution to the growing income gap problem. There is evidence to suggest otherwise. On this point, see Paul Krugman: "Graduates and Oligarchs."