Friday, January 20, 2012
Thursday, January 19, 2012
On SOPA
Several readers have asked me my opinion of SOPA, the Stop Online Piracy Act. I fear that in this case, the devil is in the details, so I find it hard to reach a strong view. But I have been disturbed by the relatively knee-jerk reaction of the anti-SOPA crowd. This is a hard issue, and when someone makes it sound easy, I feel like they haven't thought it through very thoroughly.
The anti-SOPA crowd argues that this is a matter of basic liberty. But it's not. In a free society, you don't have the freedom to steal your neighbor's property. And that should include intellectual property. Moreover, it is the function of the state to enforce those rights. We don't leave it up to civil litigation to protect property rights (although that is part of the solution). We give the state substantial powers to stop theft. Just as owners of tangible personal property have good cause to call for a police force and a system of criminal courts, owners of intellectual property have good cause to ask the state to stop those who would infringe on their rights.
This is an important economic issue for the United States. We are large producers of intellectual property: movies, novels, software, video games, TV shows, and even economics textbooks. If offshore websites find a way to distribute this intellectual property without paying for it, it is as if organized crime were stealing merchandise from a manufacturing firm at the loading dock. It is neither efficient nor equitable.
Maybe SOPA goes too far. As I said, I am not knowledgeable enough about the details to judge. But we need something along these lines. Believers in free enterprise, property rights, and economic liberty should be among the most vocal advocates of laws to stop intellectual piracy.
The anti-SOPA crowd argues that this is a matter of basic liberty. But it's not. In a free society, you don't have the freedom to steal your neighbor's property. And that should include intellectual property. Moreover, it is the function of the state to enforce those rights. We don't leave it up to civil litigation to protect property rights (although that is part of the solution). We give the state substantial powers to stop theft. Just as owners of tangible personal property have good cause to call for a police force and a system of criminal courts, owners of intellectual property have good cause to ask the state to stop those who would infringe on their rights.
This is an important economic issue for the United States. We are large producers of intellectual property: movies, novels, software, video games, TV shows, and even economics textbooks. If offshore websites find a way to distribute this intellectual property without paying for it, it is as if organized crime were stealing merchandise from a manufacturing firm at the loading dock. It is neither efficient nor equitable.
Maybe SOPA goes too far. As I said, I am not knowledgeable enough about the details to judge. But we need something along these lines. Believers in free enterprise, property rights, and economic liberty should be among the most vocal advocates of laws to stop intellectual piracy.
Five Observations about Progressivity
There has been a lot of discussion recently about tax progressivity. A few observations on the topic:
1. The U.S. personal income tax is generally progressive, and substantially so. Click here to see the numbers. The average tax rate for tax returns with over $1 million in income is 25 percent. The average tax rate for returns with income between $50,000 and $75,000 is 7 percent.
2. It is arguably better to use an average tax rate that is all-inclusive. That is, we should include not only personal income taxes but also payroll and corporate income taxes. CBO analysts regularly do that. They find a substantially progressive tax system, as I have pointed out before.
3. If we added transfer payments (which are essentially negative taxes), we would find an even more progressive fiscal system. Those data are harder to come by, as data on transfers are rarely integrated with data on taxes.
4. It make little sense to aggregate payroll taxes with personal income taxes and ignore corporate income taxes. A corollary: Paul Krugman should be more careful when reproducing graphs from partisan think tanks.
5. All of these calculations are static. They ignore the general-equilibrium effects that arise as the true burden of taxation is shifted by behavioral responses. In essence, these calculations are made under the implicit assumption that factors of production are supplied inelastically, so the tax stays where legislators put it. Of course, that assumption is implausible, especially in the long run. True general-equilibrium tax incidence is very hard, and as far as I know, reliable estimates on it are not readily available.
----
Update: Oddly, rather than admitting an oversight, Paul Krugman continues with the same misleading claims in his column in Friday's paper. Even more oddly, at his blog, he uses the tax-shift argument (my point 5 above) to justify the exclusion of the corporate tax. Of course, tax shifting because of behavioral responses applies to all taxes, not just corporate taxes. The implication of tax-shifting is not that one should just ignore corporate taxes, as Paul chooses to do, but rather that all static analyses of the distribution of the tax burden should be taken with a grain or two of salt.
1. The U.S. personal income tax is generally progressive, and substantially so. Click here to see the numbers. The average tax rate for tax returns with over $1 million in income is 25 percent. The average tax rate for returns with income between $50,000 and $75,000 is 7 percent.
2. It is arguably better to use an average tax rate that is all-inclusive. That is, we should include not only personal income taxes but also payroll and corporate income taxes. CBO analysts regularly do that. They find a substantially progressive tax system, as I have pointed out before.
3. If we added transfer payments (which are essentially negative taxes), we would find an even more progressive fiscal system. Those data are harder to come by, as data on transfers are rarely integrated with data on taxes.
4. It make little sense to aggregate payroll taxes with personal income taxes and ignore corporate income taxes. A corollary: Paul Krugman should be more careful when reproducing graphs from partisan think tanks.
5. All of these calculations are static. They ignore the general-equilibrium effects that arise as the true burden of taxation is shifted by behavioral responses. In essence, these calculations are made under the implicit assumption that factors of production are supplied inelastically, so the tax stays where legislators put it. Of course, that assumption is implausible, especially in the long run. True general-equilibrium tax incidence is very hard, and as far as I know, reliable estimates on it are not readily available.
----
Update: Oddly, rather than admitting an oversight, Paul Krugman continues with the same misleading claims in his column in Friday's paper. Even more oddly, at his blog, he uses the tax-shift argument (my point 5 above) to justify the exclusion of the corporate tax. Of course, tax shifting because of behavioral responses applies to all taxes, not just corporate taxes. The implication of tax-shifting is not that one should just ignore corporate taxes, as Paul chooses to do, but rather that all static analyses of the distribution of the tax burden should be taken with a grain or two of salt.
Wednesday, January 18, 2012
Should I put this award on my CV?
Peter Wirzbicki reports:
I just got back from Chicago, where, along with attending the American Historical Association, I participated in a series of protests held by Occupy Chicago, along with CACHE (Coalition Against Corporatization of Higher Education) that targeted the American Economics Association (AEA). It's not everyday that the worlds of street protests and academic conferences blend so well. But then again, part of the point was to “puncture the bubble” that academic economists live in.
The protesters gave out “alternative” awards for Most Conflict of Interests (Columbia’s Glenn Hubbard), Intellectual Narrowness (Harvard’s Greg Mankiw), and top prize, the “Toxic Waste of Space Award” (Harvard/Obama administration’s Larry Summers). Other than a brief yelling match that one protester got in with a professor, the tone was light and fun. Protesters “accepted” awards acting as Mankiw, Hubbard, and Summers (who reminded us how much smarter he was than us) and served “Rahmon” noodles, in honor of the Chicagoans impoverished by Rahm Emmanuel’s neoliberal policies. Overall a lot of fun, albeit fun that might have gone over the heads of the random shoppers on Michigan Ave.
Tuesday, January 17, 2012
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