Month: April 2021

Here's a quick explainer about President Biden's tax proposal. A lot of outlets are reporting that he would increase the top marginal rate on personal income to 39.6% and the top rate on capital gains to 43.4%. It's common to argue that the capital gains rate should be the same as the top income rate, but why would Biden want to make it higher?

He doesn't and he isn't. Obamacare levied a 3.8% surtax on top marginal income, so the real top rate is 43.4%. Biden is simply matching that on the capital gains side.

This has been today's edition of Fun With Tax Rates®.

Here’s the officially reported coronavirus death toll through April 23. The raw data from Johns Hopkins is here.

According to a paper published a few years ago, "The Growth, Scope, and Spatial Distribution of People With Felony Records in the United States, 1948–2010," there are 19 million people in the United States with a current or past felony conviction.¹ Here's what that looks like as a share of the adult population:

It will surprise no one to know that although felony convictions have gone up for everyone, they are far higher in the Black community than the white community. As of 2010, about 23 percent of black people had a felony conviction on their record compared to 6 percent of white people.

¹As of 2010, anyway. The number is probably in the ballpark of 25 million now, or about 12% of the adult population.

Here is Hopper, hiding amidst the tall grasses and camouflaging herself in front of the gray and white gas meter. You can hardly see she's there! This was shortly before a friend brought over her dog, causing Hopper to bolt upstairs and spend the rest of the afternoon under the blankets.

President Biden has proposed an increase in the capital gains tax to 43.4%. This produced a brief response on Wall Street and then everyone returned to their real business: namely that of piling every last cent they could lay their hands on into a SPAC.

So what would a cap gains rate of 43.4% look like? The Tax Policy Center has you covered:

It would be high! On the other hand, during the early '90s the combined individual and cap gains rates were about 70%, while under Biden's proposal they'd be about 83%. So rich people wouldn't be all that badly off.

Of course, the real question is whether it's a good idea to tax capital at such a high rate. In theory it's a bad idea since it discourages investment. But does it?

It's hard to see much of an effect in either direction. This is, needless to say, not a sophisticated analysis, but at the very least we'd like to see a downward spike in investment when the cap gains rate increases, but we see no such thing. We'd also like to see an upward spike when the cap gains rate decreases, but again, there's no sign of that. The only things we see are brief pauses in the investment rate during economic recessions.

I'm enough of a neoliberal shill to be nervous about a high cap gains rate, but I'm also enough of a technocrat to want some serious evidence that a high cap gains rate has historically been bad for investment in the United States. So let's see it. Let the games begin.

Here’s the officially reported coronavirus death toll through April 22. The raw data from Johns Hopkins is here.

President Biden committed today to cutting US greenhouse gas emissions by 50% within ten years. However, that's using 2005 as a baseline. Here's what it really means:

Compared to 2020, we only need to reduce emissions by 37% to make Biden's goal. That's the good news, such as it is. The bad news is that the sharp decline in 2020 was solely due to the pandemic, and everyone expects emissions in 2021 to shoot back up. By the time 2022 rolls around, we'll almost certainly have nearly the entire 50% still left to cut, and only eight years to do it.

It's nice to have a president who is at least rhetorically committed to fighting climate change. That's genuinely meaningful. But I will be eagerly waiting for details about how Biden intends to cut emissions so sharply.

Most of the decline between 2008 and 2018 has been the result of two things: economic recession and the shutdown of inefficient coal-fired power plants. Essentially none of it has been the result of deliberate policy. If that's going to suddenly change, I'd like to hear just what that policy is going to be.

Here's a pair of Canada geese honking their way over our little lake. About a month ago, as usual, the geese made two nests on the island in the middle of the lake, and as usual neither one of them panned out. But they never learn. Next year they'll be back and they'll make a pair of nests in exactly the same spots. What dumb birds.

John Naisbitt, author of the '80s bestseller Megatrends, died a couple of weeks ago. This got me thinking about the big underlying ideas that animate a lot of my views, so I figured I should stop for a bit and write them down. Those of you who are regular readers will recognize most of them since they pop up frequently, but there are a few that have mostly stayed in the background. Here they are:

1. US politics will stay toxic as long as Fox News is around. Rupert Murdoch has discovered that spreading fear and outrage is the most reliable way of making money, so that's what he does. It's all but impossible to sustain a traditional political system when half the population is scared senseless of the other half, and that will remain the case until Fox New is somehow reined in.
2. Don't worry so much about China. China is now, and will remain, our biggest rival on the geopolitical stage. They will cause us plenty of trouble. At the same time, they have lots of problems that aren't always obvious. Their GDP per capita is still a small fraction of ours. They are coming up on the middle-income trap at the same time that their population is aging. And most importantly, they are a paranoid autocracy that will never fully embrace market capitalism. This is their Achilles' heel, and it's the reason that the United States will stay ahead of them more or less forever.
   
3. Black students need to graduate from high school reading at a 12th grade level. This will not "solve" racism. However, it will prove impossible to make very much progress on reducing racism until Black kids are performing at the same level as white kids.
4. Geoengineering is our future. I am not in favor of geoengineering. Nobody with a room temperature IQ is in favor of geoengineering. Nevertheless, the world has shown no willingness to take the collective action needed to address climate change, and it's unlikely that a fabulous new invention will do the job either. Around 2040 or so this will become obvious and the only alternative will be some sort of geoengineering. So we'll do it. This means that we should be studying every possible form of geoengineering now so that if we end up doing it, at least we have some idea of what we're getting ourselves into.
5. The United States is the best placed country in the world right now. For all our faults, the US is by far the country best positioned to be successful over the next few decades. We have the best higher education system in the world. We have strong demographics. We valorize innovation, entrepreneurship, and competition. We are dedicated to market capitalism. Immigrants understand this instinctively, which is why the US remains by far the preferred destination for people around the world who would like to move.
6. We are entering a biotech golden age. I know, I know: we've been entering a biotech golden age for the past four decades. But after years of prologue, I think we really are finally on the verge of huge change. Cheap genome sequencing, CRISPR, and mRNA vaccines are harbingers of the near future.
7. Islamic terrorism will disappear within a decade. Explanation here.
8. Artificial intelligence is coming. Don't be fooled by all the crap that's laughingly billed as "AI" by overenthusiastic marketing departments right now. These things are all toys. Real AI is still about 20 years away, but when it comes it will be the biggest breakpoint ever in human history. It will bring about change so massive and so extensive that it's nearly impossible to predict what the world will look like 40 or 50 years from now. I wish I could be around to see it!

Here’s the officially reported coronavirus death toll through April 21. The raw data from Johns Hopkins is here.