Robotic Dystopia and Economic Growth

Youre fired!

This robot has an impressive resume.

Gregory Clark painted a dismal picture of the future in the Washington Post this weekend. In Clark’s future, the growth and spread of technological developments will push more and more unskilled laborers out of the workforce, necessitating higher taxes on those with marketable skills to pay for the basic living expenses of the unemployable masses.

Interesting. The thing I’d add though is that implied in the process of technology outmoding human labor is the assumption that technology performs the job more efficiently, which is to say, more cost-effectively. This means those who control the technology (or are under the illusion of controlling them — don’t rule out the AI uprising and subsequent enslavement of humanity) will be the recipients of larger and larger shares of profits, so the need for them to pay higher taxes wouldn’t exactly be some sort of gross imposition. Clark doesn’t seem to suggest that it is, mind you, but I’m just saying this vision doesn’t have to be quite as foreboding as it seems.

Also, I guess from the perspective of someone who is for the most part a committed utilitarian (and also at the risk of appearing a Luddite), it would be worth having a discussion about whether or not it’s really in society’s best interest to replace humans with machines that work more efficiently. It’s pretty clear that technological innovation starting in the industrial revolution has proven to be good for mankind, but if the goal is to produce a better society we really need to be weighing the tradeoffs to ensure magical innovations don’t just engender some sort of neo-feudalism. Or rather, at least ensure that any neo-feudalism therein engendered is Pareto improving.

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America’s Long Communist History

Saw this chart a number of places over the weekend, but it graphs the highest marginal tax rate in the United States since 1920, and includes on the far right Obama’s proposed hikes.

As you can plainly see, Americans have a long history of motivating themselves to enterprise even in the face of innovation crushing, socialistic, free market murdering top marginal tax rates.

As a side note, this graph also illustrates that despite the best efforts of conservative apotheosizing, Ronald Raegan did in fact raise taxes. Little known fact.

You Should Pay Less; They Should Pay More

Conservatives like poopy-pants Robert Samuelson always like to argue that the top 1 percent of earners carry a disproportionate share of tax revenue. There is some pedantic truth to this, and also something I’ve written about before, but this should piss people off at a really visceral level (via Kevin Drum):

The nation’s top 400 taxpayers made more than $263 million on average in 2006, as the stock market was rallying, but paid income taxes at the lowest rate in the 15 years that the Internal Revenue Service has tracked such data, according to figures released Thursday.

….In constant dollars, the average income of the top 400 taxpayers nearly quadrupled from 1992….Meanwhile, the group’s average income tax rate [] fell to 17.2% in 2006 from 18.2% the prior year. That’s down from a high of 29.9% in 1995.

Of course, the issue is more complicated than just the top 400 earners, but if you evaluate the spectrum of taxpayers you’ll find something resembling a bell curve when you should see something that looks more exponential, or at the very least, logarithmic.

On another note, this argument follows a similar sum-positive reasoning as to why you shouldn’t walk on the treadmill.

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More on Tax Fairness

So in response to my post yesterday highlighting the fact that the rich actually pay less in taxes as percentage of total income than many middle class families, frequent commenter Mike asks:

i can’t believe that % comparison though; all along i had assumed they were already paying a larger % of income in taxes. what accounts for this discrepancy? capital gains rates being so low? that shouldn’t cover the whole difference…

Well, it’s important to look at the exact phrasing of chart, which says, “Percentage of income paid in income, Social Security, and Medicare taxes in 2004.” So yes, while the rich do pay more by percentage purely in income tax, the rate paid for Social Security is a flat percentage (and actually has a wage ceiling, making it genuinely regressive) and the Medicare Tax is simply applied flatly. The result is a regressive effect because of the declining marginal utility of money. And yes, as Mike suggests, taxes on capital can generally be and in fact, are manipulated by the super wealthy as David Cay Johnston explains here.

Finally, it’s also worth noting that this graph doesn’t account for sales taxes, which skew regressively as well.

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Spreading the Wealth

Matt Yglesias links to this Gallup poll on “Spreading the Wealth.” As you can imagine, the concept has been, and remains today, a fairly popular notion:

Matt attributes the recent shift to McCain’s “‘educating’ Republican partisans that the pro-inequality view is the right one,” and surmises that McCain’s anti-socialist demagoguery is a net win for Obama because it raises an issue in which Democrats steal the show 58 – 37%. I’m not so sure — and the reflexive sphincter tightening any time I hear this phrase on the news suggests to me it’s not quite so cut and dry. From the same survey.

Now, the survey only lists party ID, not candidate preference (which would be far more illuminating), but this corroborates an implied assumption of the historical chart: for a majority of Americans to believe income distribution is unfair, at least some of these folks need to Republicans. Of those 30 percent of Republicans who would support more progressive income distribution, certainly some will vote for Obama (as it’s likely a number of racist Democrats will vote for McCain), but I really doubt that awareness of this issue will prompt a massive exodus from the Republican party.  Rather, as Dean Baker would argue, the socialism harangue is simply culture war rhetoric. My sense is that Obama’s tax plans were well clear enough, and the “spreading the wealth around” quote — however popular a sentiment it might represent — provides another way for McCain to rope in Racist Dems and Independents who might interpret McCain’s charges of “taxing some to give money to those who don’t pay tax at all” as some incarnation of reparations. All in all, I don’t think it will do much damage, but I think it’s tough to make the case it’s a net-win for Obama.

More Distortions

Wow, I finish one post on a disgusting McCain ad, and here comes another:

First of all, as has been widely noted, Barack Obama’s tax plan would provide Joe the Plumber with a tax cut. Second, the use of “seniors” and “hard working families” are arbitrary and misleading distinctions meant to scare those demographic groups into thinking they’ll be the victim of government pillaging. Categories like “people who wipe themselves” and “Star Wars fans” are equally illuminating. Finally, this notion that people who “don’t pay taxes” would be benefiting from those who do is simply wrong. Though it’s true a number of Americans don’t pay income taxes, they still pay payroll taxes and sales taxes, which are regressive in nature.

Of course, John McCain knows all of this — he just doesn’t care. It’s getting very tiresome to point out the extent to which John McCain is willing to distort his agenda to appeal to people who won’t actually benefit from his policies. I’ll be looking forward to this election’s end.

Joe the C.P.A.

Contrary to a previous report, Joe the Plumber does not actually make over $250,000, and so under Barack Obama’s tax plan, would actually be the beneficiary of a tax cut. Here’s his reasoning for opposing Obama’s tax plan:

In fact, the plumber told Katie Couric last night that he’s actually in a bracket that would get a tax cut, not a tax hike, under Obama’s plan; but he hopes to move up.

Is Joe the Plumber making the argument that the prospect of a higher tax rate would disincentive making more money? I mean, I know he doesn’t always pay his taxes, but he does realize that you are taxed at marginal rates under the American tax code right?