Tuesday, November 20, 2012

Math? Why, That's What Servants are For!

Yesterday, the New York Times had an article that featured interviews with some rich people who seem completely innumerate (or at least illiterate in economics).

Take as an example this:

Kristina Collins, a chiropractor in McLean, Va., said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000 for individuals and $250,000 for couples.
Ms. Collins said she felt torn by being near the cutoff line and disappointed that federal tax policy was providing a disincentive to keep expanding a business she founded in 1998.
“If we’re really close and it’s near the end-year, maybe we’ll just close down for a while and go on vacation,” she said.
 Kristina does not seem to understand that the tax increase would be only for income above (or over or in excess of, all the same thing) $250,000.  The reduced rates from the Bush tax cuts stay on that first $250,000.  The 39.6% marginal tax rate only applies to that first $0.01 earned above the $250,000 threshold.  The only way in which you would have lower take home pay despite earning more would be for the marginal tax rate to exceed 100%.  If it's at 100%, there's a maximum income (an income cap); all extra "work" would yield no more take home pay.  However, even then, your take home pay is not less than it was before; it just stagnates.  Once the marginal tax rate becomes 100.01%, then you will start to lose money by earning more.  But last I checked, no one is talking about raising the marginal tax rate to 100.01% or even 100%---or even, for that matter, 94%--the highest the marginal rate has ever been.

It is, of course, also hilarious to see the paranoid rich or conservative blowhards like Rush Limbaugh decry the return to Clinton-era marginal tax rates for income above $250,000 as (you guessed it) socialism, or even communism.  As we all know, Clinton was a rabid socialist who passed laws like TANF (or, the Make Low-Income Single Mothers Work Bill), NAFTA, and GLBA (the repeal of Glass-Steagall).  One would have though that Soviet economics came to the US right after it died in Russia!

Anyways, what also entertains me about such paranoid rants is that they often refer to increased tax rates as communism.  If the economy were fully socialized, then, obviously, the government (or the collective) would fully control the means of production and distribution.  Consequently, the idea of salaries, wages, and taxes lose their logical coherence.  How can there be taxes to pay if if your money only comes back to you in the form of allocated goods?  The purported no-tax utopia is a characteristic of anarchy (in which there is no state to tax) and communism (in which there is no private property to be taxed).

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