How Much Does Paul Krugman Want to Tax LeBron James?

Townhall.com ^ | June 6, 2015 | John C. Goodman

[Kaslin]

What tax rate should rich people pay?

A working paper by Fabian Kindermann from the University of Bonn and Dirk Krueger from the University of Pennsylvania advocates taxing the highest 1 percent of earners at a marginal tax rate that is “somewhere between 85 and 90 percent.” As reported by Ben Walsh at the Huffington Post:

Krueger described the phenomenon like this: “How much less hard would LeBron James play basketball if he were taxed at a much higher rate? The answer is not much. “James knows he only has five years,” or so of peak earning potential, Krueger said, and so he will work to make as much as he can during that time.

When asked about the study in a Huffington Post online video, New York Times columnist Paul Krugman agreed with the conclusion wholeheartedly:

What you really should want to do is to soak the rich as much as possible … So the top tax rates should be whatever it is that collects the most revenue, and now the question is, how high is that?

However, when asked by the interviewer about LeBron James, Krugman dismissed the example -- referring to James’ salary as a piker’s income. Yet, James and Bill Gates were the two personalities that Krueger pointed to in explaining how the high tax rates should work.

That made me curious. So I decided to delve more deeply.

In 2013, you were in the top 1% of households if your income exceeded $525,000. You were in the top tenth of 1% if your income exceeded $1,600,000. How much does LeBron James make? Almost $22 million a year. So whenever Krugman insults, ridicules or castigates the top 1% or the top tenth of 1% – which he does almost every other week – LeBron James is way up there with lots of other rich people.

So why doesn’t Krugman want to admit that, by his own criteria, LeBron would be taxed to the hilt? I was perplexed.

Then I realized something that I’m sure every basketball fan already knows. LeBron James is black. What Paul Krugman wants to do to James today uncomfortably resembles what slave owners did to his ancestors more than a century and a half ago.

Don’t get me wrong. I’m not accusing Krugman of advocating slavery. But when it comes to confiscating the product of someone else’s labor, the parallel is unmistakable.

Most movies about slavery tend to focus on cruelty and violence – because that’s what attracts movie goers. But as Robert William Fogel and Stanley Engelmann explained in their landmark study, Time on the Cross, slave owners of yesteryear treated their slaves much as modern farmers treat their livestock and their farm equipment: they were careful to maximize the value of their assets. As summarized at Wikipedia, the two economic historians found that:

many slaves were encouraged to marry and maintain households, they were given garden plots, the dehumanizing practice of "slave breeding" was virtually non-existent, the quality of their daily diets and medical care were comparable to the white population, and many trusted slaves were given great responsibility in managing plantations.

The slave owners spent a lot to preserve the value of their slaves. But, not surprisingly, there is no evidence that they over-paid. Just as Paul Krugman wants to do to today’s rich, the plantations sought to get the most possible net income from their chattel.

Here is the final irony. According to Fogel and Engelmann, when you add in the value of food, clothing housing, etc., the slaves got to keep about 90 percent of what they produced. In other words, the profit maximizing amount of income confiscation for the slave owners was roughly the same as Art Laffer’s flat tax!

Back to Krugman and James. How much of LeBron’s income does Paul want to seize? As much as he can. But suppose LeBron loves basketball so much he is willing to play for free. Would Paul take all of his income?

It would seem so.

[ArcadeQuarters]

> I’m not accusing Krugman of advocating slavery

I am. If one class of people works and another consumes the bulk of the benefits, it’s at least some degree of slavery. Socialism is slavery.

[Cowboy Bob]

How much tax does Krugman pay?

[Lonesome in Massachussets]

Of course, he and his team could structure his contract so that he mostly got “deferred compensation”, i.e., a pension. That would also take care of all the horror stories about former rich athletes ‘down on their luck’, having to live off social security or driving cabs.

Most likely, though, all the top stars would play for Toronto.

[RayChuang88]

We used to have income tax rates maxing out at 70%--and it nearly killed the US economy by 1980. Ronald Reagan's decision to cut the maximum rate to 28% in 1981 started to pay pay off by 1982, and the 1980's are now considered one of the great economic growth periods of American history.

Now imagine if we could have something like what Steve Forbes proposed in 1996, but at a tax rate of 18.75% so we could even phase out FICA (Social Security) taxes. The result would be the next American economic boom, possibly bigger than what we got in the 1980's.

[thirst4truth]

Whenever you press a liberal for a number they balk. I saw Hannity push Rangle to say how high? "50%, 60%, 90%" asked Sean, Rangal "more, not enough." Hannity, "name a figure", "more" said Rangal.

So if Krugman is OK with 90% tax and we know liberals are as they have passed such a tax, what is left for the state tax which in my state is 9%, they are OK with the "rich" keeping 1% of their income?

[no-to-illegals]

110% would and will not be enough for the ‘gimme thats’

[major-pelham]

Income tax is slavery - it’s morally repugnant.
It’s also bad economics. If only our highest producers were subject to the top marginal rates but those few outproduce the others by orders of magnitude then we’ll get less economic output.
Since only a few are carrying the rest now, it would be insanity to disincentivize those carrying the rest.

[LostPassword]

“James knows he only has five years,” or so of peak earning potential, Krueger said, and so he will work to make as much as he can during that time.

So I guess he'd leave the US and play in another league. They could pay him 1/2 as much but tax him 1/4 as much and he'd "make as much as he can during that time".

[i_robot73]

What did the author expect from a Liberal?

Yet most do (will) not concede the 16th as being antithesis to our Constitution (not just trampling of the 4th and 5th), but the point of the article....it is a SLAVE tax (only to degree)

Nor is it ‘fair’ it does not effect more than 1/3 of the populace of the U.S. (when we all may use govt services); the bottom 2% getting $$ they never earned, ~44% more pay ~$0 in taxes; coupled with the ability of the ‘rich’ to structure their ‘pay’ to be taxed at the lowest levels possible (good for them I say), the onerous burden typically falls upon the ‘esteemed’ middle-class.

Consumption tax. PERIOD. NO ‘prebates’.

A re-structured Fair Tax where, IMO, 23% is still WAY TOO HIGH.

[The Great RJ]

What do the rich do with their money? Like everyone else they either spend it to buy goods and services or save(invest) it. Spending or saving is based on disposable income, that is money they have after taxes. Raising taxes means less disposable income and thus less spending or savings.

What do the rich like Le Bron buy with their money? They buy high end cars, eat at expensive restaurants, buy custom suits, fill their expensive homes with high end electronics. Who sells and services high end cars, cooks and serves food at high end restaurants, makes custom suits and installs and services those high end electronics in their homes? These goods and services are provided by everyday people who make their living from providing them. If LeBron and other very wealthy people are taxed at confiscatory rates they will no longer be buying those high end goods and services and the people who provide them may well lose their jobs.

Back in the 80s Congress placed a new excise tax on high end boats reasoning that only the rich bought yaughts and they could afford the tax. That tax killed the boat building business in the U.S. as the rich simply bought their boats overseas and avoided the tax.

[az_gila]

Four guys from Liverpool wrote a song about that when they first discovered they had hit a 95% tax bracket set up by Wilson's Labour govt.

Let me tell you how it will be
There's one for you, nineteen for me
Cos I'm the taxman, yeah, I'm the taxman

Should five per cent appear too small
Be thankful I don't take it all
Cos I'm the taxman, yeah I'm the taxman

Maggie fixed it later....:^)

[Mr. Jeeves]

However, when asked by the interviewer about LeBron James, Krugman dismissed the example -- referring to James’ salary as a piker’s income.

Well, the whole game has always been to slip in tax increases on the middle-to-upper middle class (where the real money is) by pretending to be going after billionaires.

[tophat9000]

Well a slave does not have the option of not working.. but to take what you make against you will is more akin to rape

[Kaslin]

That’s for sure

[Kaslin]

He probably knows enough ways to keep his taxes low

[depressed in 06]

We have a $15 trillion(10^12) economy, 100 million workers (10^8) which equals $150,000 per workers (a sop to Marx labor value theory). Therefore a labor value scale of $50-250 thousand would maintain the current level of economic activity. The top of the scale would pay 50% in tax and the bottom 0%. Leaving the work force with $50-125 thousand in net income. This would have the effect of making a Big Mac the same price as ticket to see LeBron play. OK, the Ferrari dealers would have no customers.

My gift to Hitlery.

[__rvx86]

Oddly enough, I haven't seen Krugman & al, push for an all-encompassing wealth tax—probably because it would leave them dependent on welfare, &c.

So far, only Thos. Piketty (of France, no less) was insane enough to do so...

[Straight Vermonter]

Most likely, though, all the top stars would play for Toronto.

Correct! Lefties always assume that the 1%ers will actually pay the tax. As France has recently learned they probably will not.

The Dems made this false assumption in the 90s with their luxury tax:

Democrats in Congress made the same huge blunder with the ill-conceived boat luxury tax two decades ago. Democrats aimed at the rich, but instead hurt workers who build the larger crafts as boat manufacturers were forced to lay off employees when sales plummeted... Tens of thousands of jobs were lost, and untold thousands more related livelihoods were negatively affected by Congress’s social engineering.

Liberals believe that they can increase and the taxpayer will not respond to avoid the tax. That is unless they want to impose a tax for that purpose such as on alcohol or tobacco. It's difficult to understand the working of a liberal mind.

[justlurking]

It was actually worse than that:

JFK lowered the top rate to 70%, and the economy took off. There were a number of other problems in the 70's (high inflation being the worst), but lowering the tax rate effectively cured it.

Now imagine if we could have something like what Steve Forbes proposed in 1996, but at a tax rate of 18.75% so we could even phase out FICA (Social Security) taxes.

Without raising taxes substantially on the bottom 50%, we would need about a 20% flat tax rate with a substantial personal/household exemption to generate the current revenue from federal income taxes.

FICA taxes would be on top of that. We could fold FICA taxes into the flat rate, but then a huge portion of the FICA benefits would be paid to people that never paid any FICA tax.