• Who was Responsible for the Recession

Posted: **Fri May 06, 2011 4:05 pm**

BossTamsin (imported) wrote: Fri May 06, 2011 4:04 pm As well, it should be mentioned that correlation does not imply causation.

No, more like linkage.

Moi

Posted: **Fri May 06, 2011 4:23 pm**

bobover3 (imported) wrote: Fri May 06, 2011 2:40 pm Well, we know how you feel. That's nice. But this isn't about feelings.

my feelings had nothing to do with my response,

I read your post, gave it the right amount of analysis, thought about a proper response and then chose my words very carefully it had nothing to do with feelings and not wanting to go on and on, well you got the message.

River

Posted: **Fri May 06, 2011 6:13 pm**

bobover3 (imported) wrote: Thu May 05, 2011 11:45 pm Here are the facts -

First, US median income for people 15 and older in constant 1997 dollars. (Source: US Census Bureau. See http://www.census.gov/prod/3/98pubs/p60-203.pdf Data is available from 1947 to 1997.) Second, top marginal tax rate. (Source: Tax Policy Center. See http://www.taxpolicycenter.org/taxfacts ... ?Docid=213).

In 1947, median income was $11,852. Top marginal tax rate in 1947 was 86.45%. In 1957, median income was $12,872, while the top tax rate was 91%. In 1967, median income was $15,223, and top tax was 70%. In 1977, median income was $16,327, and top tax was 70%. In 1987, median income was $17,100, and top tax was 38.5%. In 1997, median income was $18,756, and top tax was 39.6%. For intermediate years, see the Tables.

When I enter this data in a spreadsheet and calculate the correlation coefficient between median income and top marginal tax rate for these years, the result is -0.914. This is statistically significant. It tells us that a declining top marginal tax rate is strongly correlated with an increasing median income. Note that this is median income, not average, so that rich people will not have a disproportional impact on results.

These numbers suggest that declining tax rates played a role in increasing prosperity for ordinary people.

This may run counter to emotion and expectation, but there it is.

I can't find your numbers.

I can find MEDIAN INCOME by YEAR and such numbers but not yours.

Perhaps I'm not looking hard enough or deep enough. However, it shouldn't be as hard as it is to find median income by year.

Also, I see no reason to correlate Median Income with Tax Rate. Neither is a proper measure of wealth or good times. Those decades of 47, 57, 67, 77, 87 and 97 do not signify any meaningful terms of economic prosperity.

Please explain why that correlation is meaningful...

Posted: **Fri May 06, 2011 8:29 pm**

Dave, you can find my numbers on Table C-2.

I responded to A-1, who claimed that prosperity accompanied a top marginal tax rate of 91% under Eisenhower. This interested me, so I thought I'd check the facts.

Median income is relevant because it's unaffected by extremes, as average income would be. If median income in constant dollars is up, it means ordinary people are doing better, not just a few billionaires. Median income in constant dollars indicates the purchasing power of the incomes of ordinary people. I know of no more direct measure of prosperity.

I thought it best to look at individual income rather than the more frequently cited household or family income, because this gives a truer picture of what people are earning. Household income may appear to rise because more people, i.e., women, are working, creating dual income households.

My choice of 1947-1997 was dictated by A-1's reference to 91% tax rates, and by Census Bureau data, which was conveniently available for those years. If you will point me to similar data for 2007, I'd like to extend the analysis.

So, relevant to A-1's point, the data shows a strong negative correlation between top marginal tax rate and median personal income in constant dollars. This is correlation, not causation, as IEunuch points out. There were almost certainly other factors contributing to Americans' growing prosperity during these years. The data does seem to refute the idea that "we were well off when taxes were high, but we're poor now that taxes are low."

Posted: **Fri May 06, 2011 8:53 pm**

Losethem, perhaps you're mistaking these individual figures for household or family income, which is what usually appears in the press. Those figures, of course, are much higher, which is why they're used. I invite you to examine the source data.

Since the figures are in constant 1997 dollars, figures from earlier years such as 1947 have been adjusted upward for inflation by the Census Bureau. The median income in 1947 was not $11,852, rather, it bought what $11,852 did in 1997.

I did not say that "

Losethem (imported) wrote: Fri May 06, 2011 3:30 pm lower nominal tax rates = higher median income.

" I said the data show a significant correlation, making it difficult to claim that high

Losethem (imported) wrote: Fri May 06, 2011 3:30 pm er nominal tax rates = higher median income.

Also, the discussion is only about the top marginal tax rate, not all marginal tax rates. This is relevant to the debate about the effects of taxing the rich.

Which Table shows the data you cite comparing men's incomes to their father's?

Posted: **Fri May 06, 2011 9:21 pm**

O.K., Einstein...

Since you seem to like my wild goose chases see if you can correlate national debt and nominal tax rates and see where that takes you.

Hint: STRAIGHT TO HELL!

Say hi to BINNIE for us!

Sorry that now your Cat is out of the bag...

...better watch that kitty... he is going to spray you...

(Go, cat!)

:kittygray

Posted: **Fri May 06, 2011 9:54 pm**

A-1, yeah, I guess I love wild goose chases. So much has been said here about tax rates, the rich, etc., that I felt some hard data was better than endless attitudinizing.

Yes, the national debt has gone up as the top marginal tax rate has gone down. Yet tax revenue continued to climb, except for periods of recession, such as now. You might also look at government expenditures. I think you'll find that government spending has grown much faster than tax revenues, which is one reason the national debt has grown. Yes, had taxes been higher, the debt would have grown less, but I doubt taxes could have grown fast enough to defray so much spending growth without crushing the people. There's no getting around it that we've spent too much. Squeezing a few billions more out of the top 1% wouldn't begin to solve the problem. The economic fact is that prosperity comes from the production of goods and services. For the past 20-30 years, the country had seen an explosive growth of occupations unconnected to production of goods and services - administrative, managerial, and regulatory work of all kinds. These are people who keep records and make rules and procedures and policies. Some of this helps. Too much of it stifles productivity and consumes necessary capital. We don't need or want so many people telling us what to do, and charging us for their advice.

Posted: **Fri May 06, 2011 10:51 pm**

Damit, Bobover,,,

YOU KNOW that I agree with you on this... (...especially the management part...)

Now I feel bad about 'trashing' you elsewhere on these boards...

...oh well... live and learn...

Good night, Mr. "B/3"

...we will do this again on another day!

Posted: **Sat May 07, 2011 1:00 am**

Nighty, night, A-1. I wuv oo too.

Posted: **Sat May 07, 2011 3:29 am**

bobover3 (imported) wrote: Fri May 06, 2011 8:29 pm Dave, you can find my numbers on Table C-2.

I responded to A-1, who claimed that prosperity accompanied a top marginal tax rate of 91% under Eisenhower. This interested me, so I thought I'd check the facts.

Median income is relevant because it's unaffected by extremes, as average income would be. If median income in constant dollars is up, it means ordinary people are doing better, not just a few billionaires. Median income in constant dollars indicates the purchasing power of the incomes of ordinary people. I know of no more direct measure of prosperity.

I thought it best to look at individual income rather than the more frequently cited household or family income, because this gives a truer picture of what people are earning. Household income may appear to rise because more people, i.e., women, are working, creating dual income households.

My choice of 1947-1997 was dictated by A-1's reference to 91% tax rates, and by Census Bureau data, which was conveniently available for those years. If you will point me to similar data for 2007, I'd like to extend the analysis.

So, relevant to A-1's point, the data shows a strong negative correlation between top marginal tax rate and median personal income in constant dollars. This is correlation, not causation, as IEunuch points out. There were almost certainly other factors contributing to Americans' growing prosperity during these years. The data does seem to refute the idea that "we were well off when taxes were high, but we're poor now that taxes are low."

Median income does not mean what you think it means. For instance, what is the median of these three sets of numbers:

Set 1: 1,2,3,4,5,6,7

Set 2: 1,1,1,4,7,8,9

Set 3: 2,2,1,4,23,25,26

It is insufficient by itself to describe income.

individual income rather than household income...

It is not clear to me why one measure of income is better than the other. In fact, if there is a "strong correlation" then both sets of income should show it.

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