Business

Policy-Influencing Economists: Higher Taxes Won‘t ’Discourage Wealthy From Working Harder’

Apparently, conservative economists have got it all wrong: high tax rates won’t slow the economy or discourage people from working harder, or so say economists Emmanuel Saez and Thomas Piketty.

“Top 1 percent earners now make 20 times the average, while they made only 10 times the average in the 1970s,” Saez, a professor of economics at the University of California-Berkeley, said in an e-mail to Bloomberg.

“If they worked hard then, they should continue working hard today, even if they are taxed at 50 percent,” he added.

Wrong All Along: Policy Influencing Economists Say Higher Taxes Wont Discourage Wealthy From Working HarderEmmanuel Saez

As of last month, at 39.2 percent, the U.S. has the highest corporate income tax rate in the world (hooray for us?). The top federal tax rate is now 35 percent. Saez and Piketty believe top earners in the U.S. can take on way more than that — even a 50 percent tax rate.

And if you’re telling yourself that these are just two random economists with a slightly “different” take on economic growth and taxation, think again. Their work has helped influence policy in both Washington, DC, and the European Union.

For instance, Peter Orszag, President Obama’s former budget director, has said the two economists’ research on income inequality “helped to point the way for the administration in its pledge to rebalance the tax code,” according to Bloomberg.

Moreover, as mentioned previously on The Blaze, French presidential candidate François Hollande is campaigning on the Piketty-approved promise that he will hit anyone earning more than $1.3 million a year with a 75 percent tax rate.

Simply put, their theories on taxation and economic growth are effecting fiscal policy in both the U.S. and EU.

“The idea that we need to pay people many millions of euros per year to get them to work harder is just crazy,” Piketty said in a telephone interview.

However, there is one point Piketty, Saez, and conservative economists agree on: the wealthy behave differently when their taxes are raised.

“They pursue financial strategies to reduce their taxable incomes and bargain for higher compensation, instead of cutting back on how much they work and save or becoming less entrepreneurial,” Bloomberg’s Rich Miller writes.

Saez and Piketty argue that the countries that reduced top tax rates the most since 1975 haven’t grown faster than those that cut less, Miller adds.

But the two influential economists ignore “emerging-market economies” such as Brazil and India, which have lowered top tax rates and seen faster growth than developed nations, said Alan Reynolds, a senior fellow at the Cato Institute in Washington.

It’s true: Brazil’s economy has grown at an average annual rate of 3.6 percent since 2000, which is more than double the eurozone’s paltry 1.4 percent.

Nevertheless, Saez argues in favor of increasing top tax rates and says more efforts should be taken to close loopholes so that the “wealthy” can’t avoid to the increases.

Wrong All Along: Policy Influencing Economists Say Higher Taxes Wont Discourage Wealthy From Working HarderThomas Piketty

“Capital-gains taxes should be raised as well,” said Saez, adding that an increase would “discourage” business owners from taking compensation in the form of shares, rather than salary, to avoid paying higher income tax.

“Saez and Picketty…have faced criticism for their research on income inequality,” Miller writes.

“Using tax returns, the two academic economists concluded that the top 1 percent of U.S. earners have more than doubled their share of income during the last half century, to about 20 percent in 2010 from less than 10 percent in the 1970s,” he adds.

In fact, along with the economist Peter Diamond, Saez’s work on the “1 percent” appeared in the “Occupy Handbook,” which was published last month as a guide to the worldwide movement.

“I have no problem with the rich per se,” Picketty said. “But what we’re talking about is completely insane income in my view that people are just extracting from the economy which has nothing to do with their performance.”

Read the full Bloomberg report here.

This article has been updated.

Comments (67)

1 2 3
  • cemerius
    Posted on May 1, 2012 at 1:06pm

    thats funny…the top earner tax bracket in the 70′s was 70%!! The total “numbers” may state they are making more money but they are making the same amount just getting more paper since the fed has trashed the value! Regulations have increased a thousand fold since the 1970′s and the “entitlement crowds” have encrease exponentially too!!! Glad my edumacation came from the school of hard knocks and NOT some ivy league college for the insane!!!!! Same thing goes for the value of gold it’s worth the same the dollar has just crashed!!! Regulate Congress and cut their tax payer provided “golden parachutes” and term limit their askess!!! I have never seen a BIGGER group of people that deserve their perks less!!!

    Report Post » cemerius  
    • turkey13
      Posted on May 1, 2012 at 3:23pm

      I remember when J&J moved Corporate Headquarters to Texas to get away from state income in N.J. back in late 90′s. They closed the plant in Chicago because of union expenses. They kept the plant in Sherman, TX open until 2000 even though all the competion from Proctor & Gamble and Kimbell had moved to Mexico 10 years earlier. This kind of thinking will make all MFG move out of the country + their Corporate Headquarters. All they need to do is put a countrys El Presidenti in thier back pocket and profits will sore thru the roof. The folks there will cut anothers throat for those jobs.

      Report Post »  
    • FoxholeAtheist
      Posted on May 1, 2012 at 7:17pm

      Tax the wealthy and tax their sugar.

      Report Post » FoxholeAtheist  
  • SREGN
    Posted on May 1, 2012 at 1:03pm

    Academics. They’ve studied more and more about less and less, and now they know everything about nothing.

    Report Post »  
    • pscully17
      Posted on May 1, 2012 at 7:51pm

      lol.. good take!!

      in rgards to taxing the walthy more.. that only works for a short period of time.. then, the wealthy are no longer wealthy.. me on the other hand, im a marginal wage earner with 0 tax deductions.. a singlke guy with no house, not claiming my kids, and paying child support. what is my incentive to work at all? I figured itt out last week. if I worked 7 hours less per week, id come out ahead. id be absolved from any federal tax owed, and i would qualify for housing and food assistance.. my standard of living would stay the same or actually increase… whats my incentive to keep working, when the government is aggressively promoting its long list of handouts.? paid for by YOU

      Report Post »  
    • mlcblog
      Posted on May 2, 2012 at 3:23am

      Well said. Very astute observation.

      Report Post » mlcblog  
  • moreteaplease
    Posted on May 1, 2012 at 1:00pm

    Like these two would know something about hard work. They’d probably have to go on life support for a hang nail.

    Report Post » moreteaplease  
  • 13th Imam
    Posted on May 1, 2012 at 12:55pm

    DEMOCRATS always say that the Wealthy Republicans use others to become rich. And they don’t really work hard but make others work hard and steal the fruit of their labors. Wealthy DEMOCRATS on the other hand , pay ALL their taxes ( except Wally Buffett ) and they share their wealth , NOT.

    Report Post » 13th Imam  
  • Snowleopard {gallery of cat folks}
    Posted on May 1, 2012 at 12:54pm

    Insanity of the highest order – when most of my money is taken by the Feds as taxation; the less I have availible to do investing and business with. Thus why should I bother to run any business to make money I cannot keep at the massive taxation rates.

    Britian tried it, they blew it and admitted it not long ago.

    Report Post » Snowleopard {gallery of cat folks}  
  • daleneff
    Posted on May 1, 2012 at 12:53pm

    Maybe this guys right! We should test his hypothesis before we try to implement in the real economy. We should tax economists that believe “higher taxes won’t discourage the wealthy from working harder” at 50% and if they work harder then at say 99%. We should also cut their salaries because that would by extension make them work harder as well.

    Report Post »  
  • teddrunk
    Posted on May 1, 2012 at 12:53pm

    Actually “taxing” the rich and corporations more may make no difference, considering the number of wealthy Democrat politicians and corporations that pay no taxes at all. Isn’t that right, GE.

    Report Post »  
  • Just_Us
    Posted on May 1, 2012 at 12:52pm

    The research makes the assumption that no matter how high the tax goes, behavior will remain the same. Regardless of the tax rate, the one constant is that people will avoid paying more tax than they need to. When you raise the tax rate, you create more attractive places for money to go. For example, if you tax an activity, you are rewarding some alternative activity, even if that alternative is inactivity. Case in point, large corporations sitting on billions of dollars and doing nothing to avoid punishment.
    The end result is always the same, government interference results in the unintended consequence of higher prices, fewer choices and less freedom.

    Report Post »  
  • HKS
    Posted on May 1, 2012 at 12:51pm

    It’s the commies way, ride your best horses until they drop and throw the duds a bone to keep them quiet. Meanwhile rape the hell out of their bank accounts and live happy and fat. Dwa La. It’s easy, they teach it in commie 101.

    Report Post » HKS  
  • MiCurmudgeon
    Posted on May 1, 2012 at 12:50pm

    Higher taxes won’t encourage those waiting for OBAMAMONEY to work any harder. And that’s a fact.

    Report Post »  
  • lukerw
    Posted on May 1, 2012 at 12:49pm

    And… having Cancer… will not change one’s desire to have Sex or go to Work!

    Report Post » lukerw  
  • FEWL
    Posted on May 1, 2012 at 12:49pm

    ‘Must work harder’, isn’t that what the horse said in Animal Farm? Until he dropped and they sold him? I’m just saying…

    Report Post »  
  • Ghandi was a Republican
    Posted on May 1, 2012 at 12:44pm

    When you make someone work harder and longer so someone else doesn’t have to- It’s called SLAVERY. If anyone thinks someone else has too much money all they have to do is swap a little sweat equity to get some of it. If this person cannot find someone to do this business with then then they are FOS about the whole thing. Where are these people that have too much and why wouldn’t they swap some of this “too much” money to enhance their life? This ‘person’ who is the victim of envy cannot figure out this simple principle there is no amount of help that will improve their lot.

    Report Post » Ghandi was a Republican  
  • drphil69
    Posted on May 1, 2012 at 12:41pm

    Yeah, cause businesses have nowhere else to go. They can’t export jobs, right? The fact is they will work harder – AT AVOIDING PAYING TAXES!

    Why is it then that when FDR increased the top tax rate, revenue went down? It really pissed him off so he kept increasing it, and revenue kept going down… MORONS!

    I‘m glad I don’t have any kids to inherit the mess the libs are creating. The future is yours – live with the consequences.

    Get ready….

    Report Post »  
  • cuinsong
    Posted on May 1, 2012 at 12:41pm

    Here is a simple thought for you tax & spend liberal politicians out their.
    The more you try to take peoples hard earned money the less you will get.
    If I had a lot of money I could afford to hide it where you can’t get it.
    But if I am allowed to try and invest in ways to make more then by default I will pay more tax’s and put more people to work.
    SIMPLE if you have a brain?
    You liberal politicians on the other hand never learned how to work for your own money.
    What your kind is about is living off other peoples money.
    This is your song “What’s Wrong With This Song” http://www.reverbnation.com/play_now/song_9134749

    Report Post » cuinsong  
  • Ted Zeppelin
    Posted on May 1, 2012 at 12:38pm

    Who works less than a college professor? With overly generous salaries, tenure, golden benefits, platinum retirement and not a spec of accountability they spout off to the Marxist buzz word, Forward

    These people never actually held a real a job, create a job or a marketable product or service.
    None actually earns the good life they enjoy off the backs of those who pay for their lavish life style. Yes Marge, they pay income taxes, to themselves.

    Report Post »  
  • randy
    Posted on May 1, 2012 at 12:37pm

    HIGHER TAXES WON‘T ’DISCOURAGE WEALTHY FROM WORKING HARDER’

    Actually being a small business owner, they are correct.
    But, and that’s a big BUT.
    I will not be hiring anyone during this Obama mess.
    And my just have to lay some workers off.
    Encouraging me to actually work harder than I do already.

    Report Post » randy  
  • GERATMO
    Posted on May 1, 2012 at 12:32pm

    Why dont we just get taxed %100 and have the government take care of everything? Man utopia sounds so perfect until you run out of everyone elses money, then what?

    Report Post » GERATMO  
  • Gonzo
    Posted on May 1, 2012 at 12:31pm

    The rich and their tax rates aren’t the problem, federal budgets, useless departments and entitlement spending are. So why are we arguing about tax rates for the wealthy?

    Report Post » Gonzo  
  • Itsjusttim
    Posted on May 1, 2012 at 12:30pm

    Really? I bet you 9 trillion dollars it does. As a matter of fact just over the last 100 years many millions of spiritually rich people have stopped bringing down things for you to see on the face of the earth.

    Report Post » Itsjusttim  
    • Itsjusttim
      Posted on May 1, 2012 at 12:40pm

      You will never know what makes the universe tick, and all the poking and prodding with lies and images of SciFi will never make it come down.

      Report Post » Itsjusttim  
    • Itsjusttim
      Posted on May 1, 2012 at 12:42pm

      Because the Lord knows your wicked ways, and you just aren’t going to get it.

      Report Post » Itsjusttim  
    • Itsjusttim
      Posted on May 1, 2012 at 12:45pm

      But when death and hell is cast onto the sea of fire, and it will be because you have been caught in your own snare, then it will come down.

      Report Post » Itsjusttim  
    • mitchrx7
      Posted on May 1, 2012 at 3:28pm

      IF you were an alien? Ha ha ha.

      Report Post »  
  • HorseCrazy
    Posted on May 1, 2012 at 12:30pm

    oh brother here we go people not looking at facts or numbers just injecting politics but what else can we expect from UC Berkley

    Report Post »  
  • socialism.rocks
    Posted on May 1, 2012 at 12:30pm

    its simple math corporations could easy lower their tax rate by transfering the burdon of taxes to the individual over the corporation if they paid workers a fair share so they paid taxes instead of the corporation you can instantly lower corporate rates by 20 percent… just by paying more to workers… more

    but corporations dont want tax payers…. cause then they will have a say in how those taxes are spent~

    herp a gerp~

    Report Post » socialism.rocks  
    • kaydeebeau
      Posted on May 1, 2012 at 2:29pm

      I can surmise you aren’t an accountant or have any clue as to how corporate taxation works and upon what they are taxed……I can also surmise that you have never had to buy anything, earn anything or save anything or you wouldn’t even be able to post such drivel.

      Report Post » kaydeebeau  
    • barber2
      Posted on May 1, 2012 at 2:52pm

      KAY: You are 100% correct. The name the Troll chose was a dead giveaway !

      Report Post »  
    • mitchrx7
      Posted on May 1, 2012 at 3:21pm

      What are you, like 4 years old?!? Smarten up. Your ignorance is showing.

      Report Post »  
  • Sue Dohnim
    Posted on May 1, 2012 at 12:29pm

    Thomas Piketty.. A Marxist….

    Piketty was born on May 7, 1971, in Clichy, Paris, to parents who had taken part in the May 1968 riots

    At the age of 22, Piketty was awarded his PhD for a thesis on the subject of wealth redistribution, which he had written at the ENS and at the London School of Economics, under the supervision of Roger Guesnerie.

    Piketty subsequently began comparative works on the dynamics of inequalities in other developed countries. He built statistical series based on a similar method to that which he used in his studies of France, working with other economists, particularly Emmanuel Saez. This research led to reports on the evolution of inequalities in the USA, and on economic dynamics in the English-speaking world and the countries of continental Europe.

    Piketty has close connections with the French socialist party, and took part in the economic commission of that party from 1995 to 1997.

    Report Post » Sue Dohnim  
  • JRook
    Posted on May 1, 2012 at 12:25pm

    Brazil’s economy has grown at an average annual rate of 3.6 percent since 2000, which is more than double the eurozone’s paltry 1.4 percent. Conveniently selective. Brazil had a lot of other economic issues it had to clear up including the repayment of a boat load of IMF funds and let’s not forget its default. No doubt economies that are coming out of or up from the bottom of the economic curve grow faster.

    Report Post »  
  • Individualism
    Posted on May 1, 2012 at 12:19pm

    that is true because the raising taxes is their money going towards bailouts in companies they invest in to make a nice profit off the tax payers money like Warren Buffet.

    Report Post » Individualism  
1 2 3

Sign In To Post Comments! Sign In

Sign Up For Our Newsletter!

Glenn Beck Radio

Listen to Glenn Beck 24/7 Listen Now
Restoring Love