The Instigator
BobTurner
Pro (for)
Winning
9 Points
The Contender
hd1997
Con (against)
Losing
0 Points

There are more benefits to raising taxes on the top 1 percent than costs

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Post Voting Period
The voting period for this debate has ended.
after 3 votes the winner is...
BobTurner
Voting Style: Open Point System: 7 Point
Started: 3/19/2014 Category: Economics
Updated: 2 years ago Status: Post Voting Period
Viewed: 1,020 times Debate No: 49462
Debate Rounds (3)
Comments (12)
Votes (3)

 

BobTurner

Pro

Burden of proof is shared

Structure

Round 1:
Pro: Rules
Con: Opening Arguments

Round 2:
Pro: Opening Arguments
Con: Rebuttal

Round 3:
Pro: Rebuttal
Con: "No round, as agreed upon"

Note: Con cannot post an argument in Round 3 because doing so will allow him or her an extra argument. If Con does not comply with this rule, he or she will forfeit all 7 points to me.

Forfeitting will be an automatic 7-point loss.
hd1997

Con

In the United States, the share of total pre-tax income accruing to the top 1% has more than doubled, from less than 10% in the 1970s to over 20% today (pdf). A similar pattern is true of other English-speaking countries. Contrary to the widely-held view, however, globalisation and new technologies are not to blame. Other OECD countries, such as those in continental Europe, or Japan have seen far less concentration of income among the mega rich.

At the same time, top income tax rates on upper income earners have declined significantly since the 1970s in many OECD countries " again, particularly in English-speaking ones. For example, top marginal income tax rates in the United States or the United Kingdom were above 70% in the 1970s, before the Reagan and Thatcher revolutions drastically cut them by 40 percentage points within a decade.

At a time when most OECD countries face large deficits and debt burdens, a crucial public policy question is whether governments should tax high earners more. The potential tax revenue at stake is now very large.

For example, doubling the average US individual income tax rate on the top 1% income earners from the current 22.5% level to 45% would increase tax revenue by 2.7% of GDP per year " as much as letting all of the Bush tax cuts expire (only a small fraction of them lapsed in January 2013). But of course, this simple calculation is static: such a large increase in taxes may well affect the economic behaviour of the rich and the income they report pre-tax, the broader economy and, ultimately, the tax revenue generated. In recent research, we analyse this issue both conceptually and empirically using international evidence on top incomes and top tax rates since the 1970s.

There is a strong correlation between the reductions in top tax rates and the increases in top 1% pre-tax income shares, for the period from 1975-79 to 2004-08, across 18 OECD countries for which top income share information is available. For example, the United States experienced a 35 percentage-point reduction in its top income tax rate and a very large ten percentage-point increase in its top 1% pre-tax income share. By contrast, France or Germany saw very little change in their top tax rates and their top 1% income shares during the same period.

So, the evolution of top tax rates is a good predictor of changes in pre-tax income concentration. There are three scenarios to explain the strong response of top pre-tax incomes to top tax rates; each has very different policy implications.

First, higher top tax rates may discourage work effort and business creation among the most talented: the so-called supply-side effect. In this scenario, lower top tax rates would lead to more economic activity by the rich and hence more economic growth. If all the correlation of top income shares and top tax rates seen in the above data were due to such supply-side effects, the revenue-maximising top tax rate would be 57%. This would imply that the United States still has some leeway to increase taxes on the rich, but that the upper limit has already been reached in many European countries.

Second, higher top tax rates can increase tax avoidance. In that scenario, increasing top rates in a tax system riddled with loopholes and tax avoidance opportunities is not productive either. A better policy would be to first close loopholes so as to eliminate most tax avoidance opportunities, and only then increase top tax rates. With sufficient political will and international co-operation to enforce taxes, it is possible to eliminate most tax avoidance opportunities, which are well documented. Then, with a broad tax base offering no significant avoidance opportunities, only real supply-side responses would limit how high top tax rate can be set before becoming counter-productive.

In the third scenario, while standard economic models assume that pay reflects productivity, there are strong reasons to be sceptical, especially at the top of the income distribution where the actual economic contribution of managers working in complex organisations is particularly difficult to measure. Here, top earners might be able to partly set their own pay by bargaining harder or influencing compensation committees.

Naturally, the incentives for such "rent-seeking" are much stronger when top tax rates are low. In this scenario, cuts in top tax rates can still increase top income shares, but the increases in top 1% incomes now come at the expense of the remaining 99%. In other words, top rate cuts stimulate rent-seeking at the top but not overall economic growth " the key difference with the first, supply-side, scenario.

To tell these various scenarios apart, we need to analyse to what extent top tax rate cuts lead to higher economic growth. Again, data show that there is no correlation between cuts in top tax rates and average annual real GDP-per-capita growth since the 1970s. For example, countries that made large cuts in top tax rates, such as the United Kingdom or the United States, have not grown significantly faster than countries that did not, such as Germany or Denmark.

What that tells us is that a substantial fraction of the response of pre-tax top incomes to top tax rates may be due to increased rent-seeking at the top (that is, scenario three), rather than increased productive effort.

Naturally, cross-country comparisons are bound to be fragile; exact results vary with the specification, years, and countries. But the bottom line is that rich countries have all grown at roughly the same rate over the past 30 years " in spite of huge variations in tax policies. By our calculations about the response of top earners to top tax rate cuts being due in part to increased rent-seeking behaviour and in part to increased productive work, we find that the top tax rate could potentially be set as high as 83% (as opposed to the 57% allowed by the pure supply-side model).

Until the 1970s, policy-makers and public opinion probably considered " rightly or wrongly " that at the very top of the income ladder, pay increases reflected mostly greed rather than productive work effort. This is why governments were able to set marginal tax rates as high as 80% in the US and the UK. The Reagan/Thatcher revolution has succeeded in making such top tax rate levels "unthinkable" since then.

Now, however, we have seen decades of increasing income concentration that have brought about mediocre growth since the 1970s. And with the Great Recession that was triggered by financial sector excesses, a rethink of the Reagan and Thatcher revolutions is underway.

The United Kingdom increased its top income tax rate from 40% to 50% in 2010, in part to curb top pay excesses. In the United States, the Occupy Wall Street movement and its famous "We are the 99%" slogan also reflects a view that the top 1% has gained at the expense of the 99% " a view endorsed by our findings about the highly unequal distribution of income gains during the recovery.

In the end, the future of top tax rates depends on what the public believes about whether top pay fairly reflects productivity or whether top pay, rather unfairly, arises from rent-seeking. With higher income concentration, top earners have more economic resources to influence both social beliefs (through thinktanks and media) and policies (through lobbying), thereby creating some "reverse causality" between income inequality, perceptions, and policies.

The job of economists should be to make a top rate tax level of 80% at least "thinkable" again.
Debate Round No. 1
BobTurner

Pro

At this point, I would like to point out that my opponent's "argument" is nothing more than plagiarism -- a complete copy/paste from this Guardian article located here: http://www.theguardian.com...




hd1997

Con

go to hell
Debate Round No. 2
BobTurner

Pro

BobTurner forfeited this round.
hd1997

Con

hd1997 forfeited this round.
Debate Round No. 3
12 comments have been posted on this debate. Showing 1 through 10 records.
Posted by BobTurner 2 years ago
BobTurner
No they don't. Don't try to play the victim here. When you spam, plagiarize, and spew profanities, people are going to get irritated. Just stop doing all of that, and there will be no issue.
Posted by hd1997 2 years ago
hd1997
Every one hates me
Posted by hd1997 2 years ago
hd1997
Every one hates me
Posted by Kleptin 2 years ago
Kleptin
I am extremely disappointed by Pro's third round forfeit because he didn't respond to any of the extremely important arguments in Con's round 2.
Posted by Jabuticaba 2 years ago
Jabuticaba
I challenge you, hd1997 to a debate entitled "hd1997 should be banned from DDO". I am doing such because of your acts of plagiarism, profanity, and incomprehension on how you are supposed to debate. Please accept my challenge, in order to prove to the viewers that you deserve to stay on this website.
Posted by i_know_all_and_i_will_win 2 years ago
i_know_all_and_i_will_win
hd1977 I have reported you to one of my friends a debate.org official.
Posted by BobTurner 2 years ago
BobTurner
May the records show that I have now challenged Subutai to this debate.
Posted by BobTurner 2 years ago
BobTurner
How about "There are more benefits to raising taxes on the top 1 percent than costs?"
Posted by Subutai 2 years ago
Subutai
The BoP should not lie on con at all here. You are affirming a positive resolution.
Posted by BobTurner 2 years ago
BobTurner
Also, the burden of proof, to be honest with you, should be on the trickle-downers, whom history has continuously disproved. I'm being nice in sharing it.
3 votes have been placed for this debate. Showing 1 through 3 records.
Vote Placed by bettabreeder 2 years ago
bettabreeder
BobTurnerhd1997Tied
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Total points awarded:70 
Reasons for voting decision: I don't support plagiarism
Vote Placed by vekoma123 2 years ago
vekoma123
BobTurnerhd1997Tied
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Total points awarded:10 
Reasons for voting decision: Forfeits all around, but Con laid on an insult based on calling out plagiarism. Hd1997 is likely a troll account and should be put under consideration of removal because they obviously have had difficulty making great arguments without showing flaws in every single one. Successful troll/10
Vote Placed by PiercedPanda 2 years ago
PiercedPanda
BobTurnerhd1997Tied
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Reasons for voting decision: Points for conduct because of plagiarism and profanity. Pro did not create any argument, so he is incapable of receiving points for anything else but conduct. Because of the constant profanity con has been demonstrating, I believe she should be banned from this website.