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Ernie Tedeschi
FWIW, raising just the top current federal tax bracket (which roughly conforms to the top 1% of filers by income) to 70% would raise ~$300 billion in 2019 statically if you also applied it to passthrough income. /1
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Ernie Tedeschi Jan 4
Replying to @ernietedeschi
By comparison, Piketty, Saez, & Stantcheva (2014) suggest that the optimal top marginal rate is 83% if you consider labor elasticity, tax avoidance, and bargaining power all together. But that 83% would include things beyond federal income tax, such as S&L taxes & payroll taxes.
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Adam Ozimek Jan 4
Wonder if would revise that 83% down in light of her more recent work
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Ernie Tedeschi Jan 4
Would love to know!
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Ernie Tedeschi Jan 4
Replying to @ernietedeschi
$300B by the way is ~1.5% of GDP. So... 1) The top federal rate can probably go higher, especially if you define optimality beyond just labor elasticity. 2) 70% *might* be consistent with the lit though would need to think hard about regional heterogeneity...
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Ernie Tedeschi Jan 4
Replying to @ernietedeschi
3) 70% probably raises enough for a policy on the scale of, say, robust added infrastructure investment. It's not close to sufficient on its own for, say, the federal portion of M4A. 4) Would want to consider the dynamic effect of both the tax and the policy being financed. /FIN
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Ernie Tedeschi Jan 4
Replying to @ernietedeschi
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Kyle Pomerleau Jan 4
Replying to @ernietedeschi
This assumes that the top rate on capital gains and dividends would also go to 70%. It raises about 1/3 of that if that income is excluded.
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Ernie Tedeschi Jan 4
Replying to @kpomerleau
Is she proposing excluding that?
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Kyle Pomerleau Jan 4
Replying to @ernietedeschi
Who knows! She worded her proposal just right to keep us guessing.
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Ernie Tedeschi Jan 4
Replying to @kpomerleau
True. It's clearly not a fully-baked idea yet.
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Kyle Pomerleau Jan 4
I don't think she was even that specific! I think the quote is: "such as $10 million"
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Ernie Tedeschi Jan 4
Yeah it's was a vague idea to begin with so I'm admittedly filling in some blanks that may or may not be in a final proposal.
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Kyle Pomerleau Jan 4
My best guess is probably close to $150. $100 from wages and pass-through income + $50 from other capital income.
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Ernie Tedeschi Jan 4
To be clear, you're positing that that's the bottom line effect from just the ST capital gains elasticity? Changing just the brackets shouldn't affect LT capital gains.
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Roozbeh Hosseini Jan 4
Replying to @ernietedeschi
According to Badel and Huggett the top of Laffer Curve is around 50% if you take into account human capital accumulation
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Ernie Tedeschi Jan 4
Replying to @roozbeh52
It's certainly a broad literature without concensus yet.
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Kyle Pomerleau Jan 4
I think the ST elasticity is <-1 with respect to the marginal tax rate and the LT elasticity is something like -0.7
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Ernie Tedeschi Jan 4
I thought OSPC had fields for both but apparently they just allow a LT elasticity.
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Ernie Tedeschi Jan 4
Where have you seen LTCG elasticities wrt the marginal *income* tax rate? I've only see elasticities wrt the LTCG rate, e.g.
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