Always Ask Yourself, Compared to What?


Responding to my piece about capital gains tax rates this morning, Matt Yglesias makes a couple of useful points. The first is that there’s a big difference between a capital gains tax cut that simply raises the deficit (almost certainly worthless) and a cut that remains deficit neutral because it’s offset with something else (possibly modestly worthwhile). His second point is that even if your capital gains cut is deficit neutral, the offset matters:

The politically and theoretically sound alternative is to offset your cut in taxation of investment income with new taxes on either high-end consumption or environmental degradation or both. It’s striking, however, that the political entrepreneurs promoting low levels of taxation of investment income never propose these options and seem generally unconcerned with the entire question of offsets. It’s enough to make you question their sincerity! A path to an increased national savings rate over the long-term that opens with a gigantic increase in public sector debt doesn’t make any sense, and the fact that this is the strategy they keep promoting is surely on the list of reasons that their claims are so hard to verify in the data.

Without writing a humongous post about this, it’s worth keeping in mind that this is an example of the public policy question you should always ask yourself whenever anything is proposed: compared to what? A capital gains tax cut, like any other policy proposal, doesn’t happen in a vacuum. So even if you’re convinced that it might have a positive effect, that’s not enough. How big an effect? And how does that effect compare to, say, a cut in the payroll tax? Or the personal income tax? Likewise, if you want to be deficit neutral, how does a cap gains cut paired with spending cuts compare to a cap gains cut paired with a carbon tax to make up the revenue?

Hauling out an Economics 101 argument is almost never enough to shed much light on any public policy problem that’s controversial enough to be interesting. Will a tax cut incentivize certain behavior? Sure, probably. But how much? If the effect is small, does it get swamped by other things? And how does it compare to alternate proposals? Unless you can get halfway plausible answers to those things, you’re just being sold snake oil.

DOES IT FEEL LIKE POLITICS IS AT A BREAKING POINT?

Headshot of Editor in Chief of Mother Jones, Clara Jeffery

It sure feels that way to me, and here at Mother Jones, we’ve been thinking a lot about what journalism needs to do differently, and how we can have the biggest impact.

We kept coming back to one word: corruption. Democracy and the rule of law being undermined by those with wealth and power for their own gain. So we're launching an ambitious Mother Jones Corruption Project to do deep, time-intensive reporting on systemic corruption, and asking the MoJo community to help crowdfund it.

We aim to hire, build a team, and give them the time and space needed to understand how we got here and how we might get out. We want to dig into the forces and decisions that have allowed massive conflicts of interest, influence peddling, and win-at-all-costs politics to flourish.

It's unlike anything we've done, and we have seed funding to get started, but we're looking to raise $500,000 from readers by July when we'll be making key budgeting decisions—and the more resources we have by then, the deeper we can dig. If our plan sounds good to you, please help kickstart it with a tax-deductible donation today.

Thanks for reading—whether or not you can pitch in today, or ever, I'm glad you're with us.

Signed by Clara Jeffery

Clara Jeffery, Editor-in-Chief

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate

Share your feedback: We’re planning to launch a new version of the comments section. Help us test it.