Laughonomics

Rightwingers are going nuts over the idea that President Obama plans a small reduction in tax deductions for the rich, from 33-35% to 28% - which was the rate under Saint Ronald Reagan.

To attack the idea, they have adopted the utterly ludicrous idea that the rich will work less so their incomes will fall below the $250,000 threshhold. ABC's Emily Friedman even found real people to prove it!

A 63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law...

Dr. Sharon Poczatek, who runs her own dental practice in Boulder, Colo., said that she too is trying to figure out ways to get out of paying the taxes proposed in Obama's plan. "I've put thought into how to get under $250,000," said Poczatek. "It would mean working fewer days which means having fewer employees, seeing fewer patients and taking time off."

Of course these individuals are tax idiots because the slightly higher tax rates only apply to income over $250,000 - it doesn't affect the taxes on their income below $250,000.

But rightwingers are trying to make a broader argument about the economy, not just these particular tax idiots. They are trying to argue there are large numbers of tax idiots who will do the same thing and the collective impact will be lower economic growth.

The first obvious fallacy in this argument is that very few people who make over $250,000 are tax idiots. If you're smart enough to earn that much, you probably understand marginal tax rates - even TV talking heads!

The second obvious fallacy in this argument is that if one businessperson turns away available business, another businessperson will gladly accept it. That's how competitive markets work!

Finally, if rightwing theory takes as its core postulate that businesspeople are motivated to keep every after-tax penny they can, it really doesn't matter what the highest marginal rate is. If you work to keep $1.00 - $.35 = $.65 of each marginal dollar now, why not work to keep $1.00 - $.99 = $.01 of each marginal dollar? After all, it's one more penny than you kept before.

And if keeping the last penny is an all-consuming drive, the economy would be much better off with a 99% marginal tax rate because businesspeople would work ever harder for that very last penny. Picture a dog running ever faster circles to catch its tail while the economy captures all the circular motion!

I'm not advocating a 99% marginal rate. I'm not advocating any particular rate at all. I'm just saying that a 99% marginal rate is the logical conclusion to be drawn from rightwing Laughonomics.

Update 1: David Neiwert caught Glenn Beck (on tape) saying the return of Reagan's 28% deductibility is more evil than torture.

I don't think I've ever seen a president or a government do anything that I thought was out-and-out evil. I mean, we've gotten close. I think rendition is pretty darned evil. But this is enslaving, what our president has proposed and what is in this new bill. Changes in the tax deductions for charitable giving!