Jonah Goldberg has a review of the latest book from the left's current "it" economist. And boy does Piketty has in for the rich. Pity his logic sucks. He also imputes greed on America that is ofttimes spurious. For example his core finding claims to show that personal income for the rich has soared but as Martin Feldstein pointed out to get that result he had to ignore some rather big changes in the way Americans report their income to the taxing authorities:
The most common and strongest complaint is that Piketty’s arrangement of the data paints a false picture of rising inequality in the United States. Harvard’s Martin Feldstein noted in the Wall Street Journal that Piketty fails to take into account important—albeit arcane—changes in the tax code that have caused business income to be counted on personal tax returns. “This transformation occurred gradually over many years as taxpayers changed their behavior and their accounting practices to reflect the new rules,” Feldstein writes. As an example, “the business income of Subchapter S corporations alone rose from $500 billion in 1986 to $1.8 trillion by 1992.” This leads Feldstein to conclude that Piketty “creates the false impression of a sharp rise in the incomes of high-income taxpayers even though there was only a change in the legal form of that income.”
This is a major point that I have neglected. As top marginal rates were lowered from 90% to 35% or so it made sense for smaller businesses shift to S corporations and LLCs and LLPs which pass income through to owners rather than retaining it in a tax advantaged corporate entity. Thus a lot of income that accumulated at the C Corp level and was inherited without triggering income recognition in the past is now recognized making for a lot of spurious income inequality growth. Which Piketty pockets for his pet theory without a fare the well.
Bloody garlic eating pinko.
No comments:
Post a Comment