Tuesday, October 21, 2014

Take the Money and Run!

Economists are a strange breed and European ones are the most strange. In a recent Think Progress posting they discuss a paper written by a German post-doc and a German Prof at U Penn. The article states:

A 90 percent tax rate on the top 1 percent of American earners wouldn’t just significantly reduce income and wealth inequality and boost government tax revenues. It would also be the optimal level for Americans’ welfare, according to a new paper from economists ... They find that the top marginal tax rate that maximizes government revenues before being so high as to discourage the wealthiest from earning more is very high, or 95 percent on those who are among the top 1 percent of earners. They also find that a 90 percent tax rate on the richest 1 percent could significantly reduce the Gini index, a measure of income inequality, and wealth inequality would also steadily decline. 

Now being in the top 1% does not mean a great deal if one lives in New York City or in almost all of California. In New York City one's marginal tax rate is 39% Federal, plus 14% City and State, plus 3.5% Medicare. That is 56.5% out the gate, well on the way to the above proposed target.

But the real question one should ask is who best redistributes money. Often those in the top 1% are major donors to Universities and Medical Centers as well as the Arts. For example one need only look at the Hospitals on First Avenue above 61st Street and see what the donors have done. Then compare that to a VA Hospital. It shows that the top 1% create much better outcomes in their redistribution. They really pay attention to what happens with what they give. Unlike the Federal Government whose "gifts" honor former politicians and enrich donors to campaigns. A second example is the New York Botanical Garden, supported by the top 1% and open to all who can come in and explore nature in a pristine location within the confines of New York City.

The question then simply is: who is the best re-distributor of others hard earned wealth, a collection of individuals or the Government. The answer is obvious, especially after examining the Government in the past six years. Individuals make better decisions than any Government official.

Furthermore it seems clear that some German economist most likely will never truly understand the way individualism would and has worked to make the United States what it is today. In my experience they have already two strikes against them; first they are economists and second they are Germans. As economists they see the world through often false paradigms, and from that they develop mathematical models to justify their views. Second, as Germans, based upon my decades of experience, they come from a culture of collectivism and with no inkling of individualism. As individualism was a discovery for de Tocqueville, at least he saw it in action, there never has been such a German equivalent.

Thus what we see coming from these economists in my opinion is their world view, which is reflective more of them than any reality that may exist in Nature.