you once again miss the point. I was not comparing absolute level of savings to spending - I was specifically addressing investment of capital vs savings. you are stuck in a 1st semester analysis -- you had an adverse reaction to words that seemed out of order to you. why dont you try and address the analysis.
You didn't have any analysis. You simply made a mistake and I told you what the mistake was. From your reply it's obvious you still don't know where you were wrong.
First, I always thought that interest rates were a much larger component in the save vs invest question. Second, what you are talking about seems to be the "substitution effect." Greater tax rates incourage less work/taxes because other activities give greater utilization. But you are forgeting the income effect. Greater taxes also could mean that people would invest more in order to maintain the same level of income with the greater taxes. I don't know any studies about this with investing, but when it comes to hours worked in the male population in USA. The effects actually completely cancel each other out. With the women the Sub. effect is stonger and produces a decrease in hours worked.
the point you make is interesting and I also found references to studies which apparently came back as inconclusive with respect to progressive rates and savings vs investment. But, that is the type of anaylsis I was expecting from James bond who claims to be a stats professor. In the end this debate would come down to which school of ecomomics you argue from and current trends. I was going with some neoclassical and austrian school type arguments. (imho) and james was going with liberal large govt bloat. What I do know is that if you look this up on the net - Japan is trying to take down its progressive rates to stimulate investment and reduce savings. venture capitalists and angel investors always forecast their expected likely of return - vs the risk free rate of return in their spread sheets and they tax into consideration taxes. Investors look at EBITDA Earnings before interest taxes deperciation and amortization not only is a consideration when looking at stocks. Heck commercial real estate investors strongly consider their tax position as well. Even stock brokers at ML do that analysis for their clients. I noticed when arguing with other people James bond no longer supports his arguments. I think this is now a fake fake james bond. I am no longer going to arguue with him. I am tired of arguing with a guy who no longer has the brain power to support his arguments.
I'm not up on the Econ theories as much as I should be, but I don't remember much in the way of progressive/regressive tax analysis. Most of it had to do with overall tax rates. I agree that everyone looks at the impacts of taxation when looking at investment. But in itself, that doesn't prove one way is better than another. If you asuume that clients of ML and Corp real estate investors are in the upper tax braket, which I think is a safe assumption, that would appear to minimize any effects of variance across brakets. ie. all investments face the same tax rate so distortion from realtive taxation should be minimized. One option that has been missing in this whole debate is the consumption. You can save, invest, or consume. It is hard to ignore this option as the US econmoy has been considered consumer driven for quite some time now. The Marginal propensity to consume in the lower tax brakets has always been much higher than for the upper tax brakets (for better or worse.) This implies that lower relative tax rates in the lower brakets would do more to spur consumption. Which would drive the economy. Which in turn would create the demand for investments. Thats the arguement that I see for more progressive tax rates. P.S. We have lots of very regress taxes outside of the income tax.
The Marginal propensity to consume in the lower tax brakets has always been much higher than for the upper tax brakets (for better or worse.) This implies that lower relative tax rates in the lower brakets would do more to spur consumption. Which would drive the economy. Which in turn would create the demand for investments. Thats the arguement that I see for more progressive tax rates. ----------------- your argument is the old argument put forth by the supporters of progressive rates. Just look at the wikipedia article I cited. the counter argument is stronger in my opinion. Your argument assumes that it is better to have the lower brackets consume rather than have capital formation. I think China just proved that argument to be trash. However it really is a moot point -- how can you prove the lower brackets really outconsume the higher brackets. No one really knows the optimal tax schedule What we do know is --- as you take down high end tax brackets - business starts to improve. Look at ireland. We also know that if you have truly progressive taxes you suffer brain and capital drain. Look at England and Europe in the 50s and 60s.
I agree that everyone looks at the impacts of taxation when looking at investment. But in itself, that doesn't prove one way is better than another. ___ this argument seems to brush aside the merit of the example I gave without addressing it. I am not sure what you mean. Are you saying you are not sure it would have been better for the U.S. to have invested in cds over information technology last decade?
I agree that nobody knows the optimal tax structure. It even could change with how developed a country is. "Outconsuming" isn't the point. The marginal propensity to consume is. If I was given $1000, that wouldn't change my behavior. If you gave a family making $25,000 a year, a fair assumption is there consumption would go up more than mine. This seems pretty straight forward to me. Citing China, a communist/socialist country as an example seems a pretty horrible arguement in my mind. Granted I don't know a ton about China's boom, but I do know they are still communist/socialist. So instead off actual attacking the analysis you provided some spotty examples.