Yesterday NDP leadership hopefull Brian Topp released a taxation policy paper [PDF]. Sun News interviewed Topp last night and I acted as a responder – video available here. One particular item of interest is the introduction of a new 35% tax bracket starting at $250,000 (the existing highest tax bracket starts at $132,406 in 2012 and has a marginal tax rate of 29%). The move is said to raise $3 billion, though their math is not shown – the footnote on the figure reads Calculations from “Income Statistics 2010 – 2008 Tax Year” Basic Table 2A, Canada Revenue Agency.
Until last night on Twitter, no one that I saw made an attempt to estimate a revenue figure. Kevin Milligan with some assistance from Stephen Gordon did a back-of-the-envelope type calculation and determined the actual amount would be somewhere between $1 and $2 billion.
Parties and groups releasing government revenue estimates of dubious quality is all too common. It would seem to me that there is an opportunity for an enterprising young economist to make a name for themselves by providing better estimates. Someone adept at SPSD/M could churn our a high-quality estimate in less than an hour (ignoring, of course, the fixed cost in learning SPSD/M). It would be a quick and easy way to get your name out to the world through the media and make a name for yourself in economics. It would look terrific on a CV or resume to say your work has been cited in the Globe and Mail or on CTV. It's a tough labour market out there; you need to find a way to stand out from the crowd. This would be one way to do so.
Worthwhile Canadian Initiative 
In order for me to take that seriously, you need
a) A meaningful definition of ‘corporate power’.
b) An explanation of how higher corp taxes would reduce it.
“that is, they’re only fallacies when looked at from a particular point of view.”
What “point of view” would that be? Sobriety?
In my defence, m’lord, I checked my lefty goggles at the door of this thread.
‘One of the things going on here is that Gordon et al are missing the point. The reason to go to a higher tax rate for corporations is not to generate an optimal government income, it’s to reduce corporate power. If you are going to compare Canada to the Scandanavian countries the first thing to note is not the tax code, it’s the institutional power relations. They are very different. Different electoral systems, stronger unions, sector bargaining, union board representation are all more important than taxes. Optimizing tax structure is the end game, not the opening.’
This statement is an example why of I have a lot of respect for economics as an analytical discipline. The problem with this statement and others by Mandos et al is it’s a bunch of unsubstantiated assertions with no logical coherence or empirical foundation. I’m not a fan of economists making normative statements appear to be positive one but at least economics as a discipline has a analytical framework that (generally) allow economists to make arguments that are not half-assed reasoning and when they do make such arguments they’re ripped for it by their own kind.
I think the problem is largely with c-suite managers and their buddies on the board who face totally perverse incentives armed with other peoples money and assets.
I’m not at all convinced that a plurality of shareholders are really thinking that those c-suite comp packages are the best use of firms money… but what are you gonna do? When was the last time any of us voted our shares? And even if we did, would it make any difference?
That was Jim Rootham, not me, re corporate taxes. For the record, that’s one of the issues on which I have been willing to be partly convinced (ie into at minimum agnosticism), because it’s one of those issues on which one can achieve the same ends by other means. Nick’s posts about central bank behaviour have been very useful and educational in that regard, and would say that at least he partly takes the time to understand the objections on their own terms, and present a case that addresses the actual issues.
My major objection—since pretty much Stephen’s first post at babble like, 10 years ago—hasn’t been that economists have illogical arguments. It’s been that they haven’t addressed the issues, and start from a conceptual ontology of the universe that largely favours the right-wing. You can have all the sound analysis you want, but it’s not worth a hill of beans if it’s derived from a view of the universe that already assumes the conclusion. (And whose empirical basis is extraordinarily poor compared to any other science making as tendentious a set of claims.)
The frustrating part is that Stephen’s main and repeated accusation towards left-wing policies is that they’re sometimes not downwardly redistributive. Well, of course they aren’t—there’s even a whole school of thought (I don’t subscribe to it personally) that downward redistribution is actually actively harmful under capitalism because it reinforces and legitimizes capitalist structures. If we set the end goal, instead, towards maximizing labour’s control over the means of production, ie, the classic leftist goal, then very many things in the economist consensus are automatically suspect, and it’s really up to economists to show that, in the real world, they aren’t. Tell me, is it a “long-exploded fallacy” that Real Existing Free Trade hurts organized labour’s ability to bargain? I don’t know how the left wing became confused with a charity organization.
(Some people are attracted to the appearance of formal analysis, but there are domains in this world where it is neither possible nor reliable nor better than informal heuristics. Predicting collective outcomes from large numbers of individual autonomous agents is one of those areas, if we want to talk math…)
Tell me, is it a “long-exploded fallacy” that Real Existing Free Trade hurts organized labour’s ability to bargain?
Yes. What free trade does is reduce the monopoly or oligopoly rents earned by corporations that labour unions could bargain over. Absent those rents, long-run wage compensation (like, I hasten to add, capital compensation) is linked to productivity. The irony here is that, in your analysis, the problem with free trade is that it has reduced the ability of producers (both corporations and unions) to exploit consumers and the remedy you propose is to increase the powers of corporations to exploit those consumers (so that labour unions can share in those rents).
But in the context where the end goal is worker ownership of the means of production, the consumers become the corporation. This strategy of permitting consumers to bargain prices down using foreign, labour/environmental/regulatorily relaxed jurisdictions or polities is the same as workers shooting themselves in the eye.
A look at US manufacturing should tell you that. Where did those workers (consumers) go? They didn’t all go to Wall Street, let me tell you that!
Concern over corporate monopoly/oligopoly rents only exists when corporations have private owners. If corporations are in some sense run by and for the public, then it doesn’t matter.
So no, it’s not a fallacy if you don’t see reducing prices to consumers as an untrammeled good, and if your goal is to preserve labour’s share of the “rents” and ideally maximize it to 100%. Wal-Mart comes with steep social costs. It also comes with the instability we see today. And this is all traceable to a globalization that become disconnected from democracy. Which is the definition of free trade.
The larger point being, your answer makes sense if we conceive of the economy as containing the organizing concepts we use here and now, and your goal is simply to make it for a short time more livable. If your goal is to supplant this society by something else, and use democratic means to do so (as opposed to violent revolution which is where we are heading despite best efforts), then anything that shackles democratic oversight of the economy due to the short-term costs of backing out is a crime.
And that is what I meant by assuming the conclusion. Of course free trade has a positive effect for consumers. It’s practically built into the starting assumptions of the model. It’s not even an empirical question at that point. But Real Existing free trade is one of those things that has instead enabled certain actors to gain greater political control over the economy, and find ways to distribute productivity gains upward.
The global rich never lost a penny of those “rents” from free trade. It’s been, in real existing reality, taken out of the hide of workers as part of a larger rollback of the gains of labour. Therefore, whatever tools economists are using to model the situation are missing something.
Here’s a blog comment that says it much better than I can:
This fits Bob Smith’s reply to me like a T. I mean, the metholodogical simplifications, forms of measurement/objective criteria, and so on of mainstream economics practically require that merits of free trade (and a bunch of other things) fall out trivially and analytically. It’s practically tautological.
Economists may not intend this, as some kind of deliberate right-wing plot. I am not declaring there to be a conspiracy except for those who’ve taken obvious political money (and they exist).
My point, ultimately, is that if you want the left to pay attention to what economists have to say, you first have to show that your models can define the policies that actually match their goals. That requires understanding their goals, which require some ability to think utopianishly. It’s a lesson that Stephen never seemed to learn even after all the time he spent at it before he started his own blog. And why should you care? Because in the medium term future, there’s a non-trivial possibility that people like me (not me myself, obviously) will have much greater access to power in Canada than we do currently, as the political pendulum swings.
“The global rich never lost a penny of those “rents” from free trade”
Tell that to the shareholders (and bondholders) of GM and Chrysler.
“people like me…will have much greater access to power in Canada than we do currently, as the political pendulum swings.”
With ideas like that, I won’t hold my breath.
Anyone who was truly rich wasn’t really affected by GM and Chrysler. They were hedged in various ways. There is not much churn in the fortunes of the top 0.1%. As amply noted, quite the contrary! Or did you miss the whole Occupy thing? The Eurocrisis (who is really getting bailed out here, and in what ways is labour getting hosed…)?
I mean, the fact that you think that GM and Chrysler shares and bonds lend any sort of support to your point suggests that, once again, you are coercing reality to fit an abstract tautology you believe is knowledge.
Again, you don’t know what you’re talking about (and you accuse me…). Wasn’t this thread about the NDP? Well, the NDP base, and not a little of the lefter part of the Liberal base, even, is even less willing to engage with economists than I am, and even less willing to listen to the free trade argument. I’m at least willing to listen, in particular when I know that some attempt is being made to understand the objection on its own terms (e.g., as I said, the recent monetary policy discussions). This group of people will not be out of power forever, particularly as the neoliberal gestalt fades into history, and while I’m under no illusion that they won’t have to make compromises, the thinking I’ve described to you will still underlie their intentions.
“Well, the NDP base, and not a little of the lefter part of the Liberal base, even, is even less willing to engage with economists than I am, and even less willing to listen to the free trade argument.”
Which, if true, only highlights the point that the NDP isn’t a serious political party, or at least isn’t serious about governing (and prefers ideological posturing to actually worrying about improving the common good).
Indeed the contrast between the federal NDP, on the one hand, and European socialist or social democratic parties (burdened with the responsibility of actually having to governs), or even their much more responsible provincial cousins in Saskatchewan, Manitoba (and increasingly Nova Scotia) suggests that the future of the NDP will either involve a maturing attitude towards the market and economic policy more generally, or a return to third party status in the house.
Some of whom participated happily in leading their countries into what is increasingly recognized to be the Euro foolishness and have been discredited in their current forms, a British Labour party whose capitulation to neoliberal economics led to its dire situation, etc, etc, etc…
Like I said, we’re coming to the end of this experiment in accepting economists’ conclusions derived from odd assumptions and it’s not looking good. Everything that the hard left said was wrong with the direction of the world has turned out to be correct. If we don’t want to repeat this cycle, we have to try something new.
I think many especially on this blog need to differentiate between the Canadian context and the broader international context on many of these issues. I would argue even more strongly that one of Stephen Harper’s greatest political sucesses has been to steal the flag of Canadian nationalism and appropiate for himself. This in my opinion leaves the left in Canada in a very torn position between international solidarity with Greek Strikers and Occupy Wall Street and their 1970s era support for Canadian nationalism(the left in Canada forgot under Trudeau that nationalism is always an inherently right wing force).
In Canada you also have the issue of a large traditional “male” “physical” workforce that is growing and doing quite well economically right now in the natural resources sector that provides a counterbalance to Harper and the conservatives against middle class aganst in places like the GTA.(Effectively the political status quo in Australia for example been sustained by the continued economic success of this group of workers) There was actually a very good article in the National Post today showing how the middle class squeeze in Canada is not just from above but also from below.
The second issue is that there has always been a divide between social democrats in Quebec and social democrats in the rest of Canada much as in the same way the left in UK and the left on the European continent have always been divided over support for the EU for example. Right now with a Quebec provincial election possibly just a year away the NDP has NO natural ally in Quebec provincial politics. The Liberals, PQ, and now the CaQ all for example strongly oppose any further increasing of federal spending in provincial jurisdictional areas and all in fact want decreases. It would seem hard to reconcile this with what a NDP goverment would want to do at the federal level.
“The Liberals, PQ, and now the CaQ all for example strongly oppose any further increasing of federal spending in provincial jurisdictional areas and all in fact want decreases. It would seem hard to reconcile this with what a NDP goverment would want to do at the federal level.”
This is already an area where the NDP is hopelessly conflicted. I think the way they want to try to square the circle is with the notion of asymetric federalism (i.e., a strong centralized federal government, with an opt-out for Quebec). This was an easy policy to adopt when the NDP was safely ensconced in third place in Ottawa (and when NDP policies didn’t attrac critical scrutiny if they were examined at all). In practice, the idea of providing an opt-out only for Quebec is likely to be politically unsellable in English Canada (and will make enemies of the provincial premiers), while the notion of providing opt-outs for all provinces undermines the NDP conception of a strong federal government (and, in any event, is likely to be an approach adopted by the federal Tories). The NDP is about to learn what the Mulroney Tories learned before them, winning Quebec can be a poisoned chalice if the price of doing so is making promises that can’t be cashed in English Canada. The end result is winning neither Quebec nor English Canada.
“I would argue even more strongly that one of Stephen Harper’s greatest political sucesses has been to steal the flag of Canadian nationalism and appropiate for himself. This in my opinion leaves the left in Canada in a very torn position between international solidarity with Greek Strikers and Occupy Wall Street and their 1970s era support for Canadian nationalism(the left in Canada forgot under Trudeau that nationalism is always an inherently right wing force).”
I think the distinction between the two forms of nationalism is that the Canadian nationalism of the 1970’s was as much a function of left-wing anti-Americanism as it was Canadian “nationalism” (Jack Granastein has a book on that phenomenon). By virtue of our geography and history Canadians (and the Canadian left in particular) has a somewhat parochial world view which defines Canada by virtue of its difference from the US. Take the purportedly “Canadian” icon of medicare. There’s nothing particularly Canadian about it, in fact we borrowed the idea from European social democracies (namely the Brits, about 20 years after the fact, and since then have ignored the evolution of the european models of public health care), except that the Americans don’t have it. Therefore, it is, in left-wing eyes at least, a badge of true Canadian identity.
The evolution of a Canadian nationalism that is linked to Canada’s history, rather than defined in opposition to the United States, is a positive development for Canadian politics.
Bob Smith:
I would disagree to a limited degree with “The end result is winning neither Quebec nor English Canada” I have always thought that if Charest had been leader of the PC’s and siting Prime Minister in 1993 they would not have gone down to two seats(technically it should be considered three as Giles Bernier father of Maxime was reelected in the Beauce as an independent after being expelled by Campbell) and probably would have held 20+ seats in Quebec(a significant number of Bloc MP’s would still have been elected). Outside of Quebec it would have been pretty bad still for the PC’s especially in the West but at least they would have had a better base to build on for 1997 and perhaps a stronger hand for the PC side of the party in the eventual merger neogiations with Reform/Alliance.
As I such I am strongly of the belief from pure political calculus the best leader for the NDP right now is Tom Mulcair who I think could guarantee them at least 30 to 40 seats in Quebec which is much higher than what they have averaged over the years from the rest of Canada combined.(Mulcair as leader could cost them every seat OUTSIDE of Quebec but 40 seats is still 40 seats even if they are all in Quebec). I suspect though the NDP membership in RoC has no of intention giving Mulcair the leadership just as realistically it would have been tough for Charest to beat out Campbell in 93 among PC members(though there was movement to Charest away from Campbell toward the very end of the leadership campaign). As such when the “blank” hits the fan for the NDP as it did for the PC’s back in early 1990s they will be in position as you suggested of losing both Quebec and English Canada. I also note that many of the NDP leadership candidates appear to have a level of French speaking skills similar to those of Kim Campbell.
Like there’s no enormous right-wing elephant south of the border that threatens local control over practically everything (energy, water, security…)
Going back to free trade, I’d be willing to sign on if it were practical to create an international elected parliament with “teeth”. Oh, you’re saying, it’s not?
Well, gosh, someone should have told Europe that. What’s astonishing is that Europe has pretty much internationalized everything but real representative democracy, and yet Eurozone failure is underway. That’s because it’s a natural consequence of coupling economic relations from political oversight. But most newspaper and bloggy economists are focused on either Eurozone monetary policy, or, a (better) minority, exhorting Europe to form a pushme-pullyou fiscal union with little thought as to how that may look…
“de-coupling”. Gack.