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Sometimes, a Tax Cut for the Wealthy Can Hurt the Wealthy
New York Times ^ | November 24, 2005 | ROBERT H. FRANK

Posted on 11/24/2005 11:05:58 AM PST by nickcarraway

WHEN market forces cause income inequality to grow, public policy in most countries tends to push in the opposite direction. In the United States, however, we enact tax cuts for the wealthy and cut public services for the needy. Cynics explain this curious inversion by saying that the wealthy have captured the political process in Washington and are exploiting it to their own advantage.

This explanation makes sense, however, only if those in power have an extremely naïve understanding of their own interests. A careful reading of the evidence suggests that even the wealthy have been made worse off, on balance, by recent tax cuts. The private benefits of these cuts have been much smaller, and their indirect costs much larger, than many recipients appear to have anticipated.

On the benefit side, tax cuts have led the wealthy to buy larger houses, in the seemingly plausible expectation that doing so would make them happier. As economists increasingly recognize, however, well-being depends less on how much people consume in absolute terms than on the social context in which consumption occurs. Compelling evidence suggests that for the wealthy in particular, when everyone's house grows larger, the primary effect is merely to redefine what qualifies as an acceptable dwelling.

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Constitution/Conservatism; Culture/Society; Editorial; Miscellaneous; News/Current Events; Politics/Elections
KEYWORDS: commienomics; economics; nyteconomics
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Robert H. Frank has taughtintroductory economics at Cornell University since 1972. He is co-author, with Ben S. Bernanke, of "Principles of Microeconomics."


Have at it...

1 posted on 11/24/2005 11:06:02 AM PST by nickcarraway
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To: nickcarraway

He is an economics teacher approved by NYT. What more do we need?


2 posted on 11/24/2005 11:09:00 AM PST by arthurus (Better to fight them over THERE than over HERE.)
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To: nickcarraway

I agree. His argument is purely economic not political. Platitutes are not going to make the reality go away. We are fat becoming Brazil. (before you flame, I vote Republican down the line). Nevertheless, economic reality is economic reality.


3 posted on 11/24/2005 11:12:56 AM PST by The Cuban
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To: nickcarraway
Well, but in the terms of his "logic", were I a "wealthy" person with a mansion [which I, regrettably, am not] - having everyone else on my street living in mansions as well would not make me happy, but - since happiness is by contrast - driving past a group of penniless bums on a street corner most certainly would.
4 posted on 11/24/2005 11:14:56 AM PST by GSlob
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To: nickcarraway

I didn't know that the NY Times published comic strips.


5 posted on 11/24/2005 11:15:03 AM PST by garyhope (.)
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To: nickcarraway
well-being depends less on how much people consume in absolute terms than on the social context in which consumption occurs.

I'm in poverty if my house is smaller than yours. Plus that gives me the right to apply for welfare and steal from you. Plus if you have a new mercedes and I only have a new honda, I'm poor and entitled to food stamps and medicaid.

6 posted on 11/24/2005 11:17:12 AM PST by staytrue
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To: nickcarraway
In the United States, however, we enact tax cuts for the wealthy and cut public services for the needy.

What cuts. President Bush has overseen the largest expansion in Medicare since the Johnson Administration.

I should point out that conservatives don't favour "cuts" per se - we just don't want the government to be providing services to the poor, as they're so crap at it. No conservative wants cuts in charitable work, unless we're talking corruption in the Red Cross.

Regards, Ivan

7 posted on 11/24/2005 11:20:47 AM PST by MadIvan (You underestimate the power of the Dark Side - http://www.sithorder.com/)
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To: nickcarraway
A careful reading of the evidence suggests...

There's an important difference between "careful" and "selective".

8 posted on 11/24/2005 11:20:54 AM PST by Starve The Beast (I used to be disgusted, but now I try to be amused)
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To: The Cuban
Give me a break. This is the same-old tired Marxism that's been debunked day in and day out.
9 posted on 11/24/2005 11:22:08 AM PST by Extremely Extreme Extremist (JOE WILSON IS A MUTHAFAKING LIAR)
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Comment #10 Removed by Moderator

To: GSlob
I prefer that the wealthy continue to consume, and if tax cuts help them to consume, then give them tax cuts. Every time they consume, I have a shot at their money. When the Gov. taxes it from them it goes to someone else, usually someone not willing to compete for it.
11 posted on 11/24/2005 11:27:43 AM PST by D Rider
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To: flashbunny
And most of these "public services" wouldn't be needed if everyone gets to keep more of their money.
12 posted on 11/24/2005 11:31:00 AM PST by Extremely Extreme Extremist (JOE WILSON IS A MUTHAFAKING LIAR)
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To: Extremely Extreme Extremist

No it is the old economic theory of utility. What is better, a mansion ins a cess pool, or a mansion surrounded by other mansions? He is saying society at large, is turning into a cesspool.


13 posted on 11/24/2005 11:31:07 AM PST by The Cuban
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To: The Cuban
No it is the old economic theory of utility. What is better, a mansion ins a cess pool, or a mansion surrounded by other mansions? He is saying society at large, is turning into a cesspool.

Wrong. The author stereotypically defines the wealthy. First of all, most of the wealthy live modestly and in normal homes. Second of all, it's their money. None of the author's business what people live in or what they buy.

14 posted on 11/24/2005 11:34:42 AM PST by Extremely Extreme Extremist (JOE WILSON IS A MUTHAFAKING LIAR)
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To: The Cuban

I'll agree with you on the two-tiered thing -- but note, this has happened before and the system corrected itself.


15 posted on 11/24/2005 11:34:54 AM PST by durasell
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To: The Cuban

Dosn't the poorest ten percent of the U.S. have a better quality of life then anywhere else in the world. Often better than a higher percentile in other nations?


16 posted on 11/24/2005 11:39:45 AM PST by nickcarraway (I'm Only Alive, Because a Judge Hasn't Ruled I Should Die...)
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To: Extremely Extreme Extremist

No. Let me change the situation. Is it good to own a ford escort when there are no roads to drive it on or own a ford escort when there is a road system to ride it on. His argument is not dependent on a particular definition of wealth.


17 posted on 11/24/2005 11:42:26 AM PST by The Cuban
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To: nickcarraway

He is not arguing that it is not. He is arguing the opposite of "in a rising tide all boats rise". He is arguing that the tide is falling.


18 posted on 11/24/2005 11:43:44 AM PST by The Cuban
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To: The Cuban

Based on what evidence? Standard of living has been rising in this country.


19 posted on 11/24/2005 11:46:35 AM PST by nickcarraway (I'm Only Alive, Because a Judge Hasn't Ruled I Should Die...)
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To: nickcarraway

There are serious structural flaws with the current economy.


20 posted on 11/24/2005 11:48:20 AM PST by The Cuban
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