When Zucman released his stats to the New York Times in 2019, several economists noticed something fishy in his arithmetic. His calculations made the assumption that wealthy shareholders bear the entire burden of corporate taxation. But corporate-tax incidence spreads across a variety of economic actors due to pass-through effects and the distortions that these taxes create for investment. For example, workers ultimately pay about 20 percent of the corporate-tax burden, according to the center-left Urban Institute–Brookings Tax Policy Center. Other estimates suggest that as much as 40 percent of the burden falls on labor. By assuming these difficult realities out of existence, Zucman severely overstates the estimated tax burden on wealthy Americans in the mid 20th century, when federal corporate-tax rates were much higher than they are today. In other words, he overestimates the top earners’ “before” picture, which exaggerates the before-and-after comparison of tax rates.
Zucman uses a similar sleight of hand for the bottom end of the income distribution. He intentionally excludes the earned-income tax credit and the child tax credit from his math. By omitting these refundable credits, his statistics overstate — by nearly twice as much — the tax rates on the bottom 20 percent of earners. These adjustments create the illusion that taxes on the wealthy have declined over the past half century while taxes on the poor have dramatically increased.
Reality paints a different picture, and Zucman once conceded as much. Shortly before he made his famous claim in 2019, the Berkeley economist co-authored a paper using more-conventional accounting methods to estimate the tax burden of the top 0.001 percent of earners. According to those findings, these earners paid an estimated 42 percent of taxes in 1964 and 41 percent in 2014, suggesting that the overall tax rate on the ultra-wealthy was essentially unchanged in the intervening half century.
So, what accounts for this discrepancy between Zucman’s studies? Zucman appears to have placed his finger on the scale. Shortly before his news-making claim in 2019, it seems, he quietly deleted the conflicting data from his website — until other economists noticed the cover-up. In the aftermath of this discovery, former treasury secretary Larry Summers declared that he was “about 98.5 percent persuaded by [Zucman’s] critics” that the data are “substantially inaccurate and substantially misleading.” Even Harvard balked at Zucman’s apparent propensity to bend his academic research to fit his political views. The university reportedly canceled a job offer to the economist in 2020 over concerns about his data integrity.
The AEA’s medal citation clouds Zucman’s academic malpractice in unintentional euphemism. The association credits his “entrepreneurial and creative pursuit of new data and methods for economic measurement.” It certainly takes “creativity” to craft a narrative favoring wealth taxation when the wealthiest earners already shoulder the largest share of the tax burden, and when our tax system is already highly progressive. Sadly, the AEA has chosen to side with left-wing politics over empirically verifiable reality.
Antony Davies describes “Paul Krugman’s magic act.”
Research confirms the impact of debt on long-term interest rates. Every percentage point increase in the debt-to-GDP ratio is associated with an increase of three basis points (0.03 percent) of the long-term real interest rate. So, if the debt ratio rises by 100 percent over the next 30 years, it will put upward pressure on interest rates of about three percentage points.
Writing in the Wall Street Journal, Ilya Shapiro debunks the claim that Clarence Thomas is akin to Abe Fortas. Two slices:
Abe Fortas has been in the news of late—a feat for someone who died in 1982. Amid a campaign by Democrats and partisan journalists to tar conservative Supreme Court justices for “ethics” violations, outlets including the New York Times, the Washington Post and NPR have cited the example of Fortas’s 1969 resignation, implying that the justices they disfavor might want to follow it.
But there’s no parallel. Fortas embodied cronyism and corruption, with direct conflicts of interest involving parties with business before the high court and legal advice to a businessman who was investigated, indicted and convicted of federal felonies. He also acted as a regular adviser to a president whose administration, like every administration, was a repeat Supreme Court litigant. None of the currently serving justices have been accused of anything remotely comparable.
…..
Justice Fortas resigned not over some chain of hypotheticals but over financial conflicts that failed the smell test even among his partisan supporters. He was felled by greed and hubris in a way that went beyond disclosure mistakes. It’s a far cry from any of the smears, insinuations and trivial, error-filled reporting we’ve seen leveled at the current justices over the past month.
Ryan Bourne, writing with Sophia Bagley, counsels calm about stock buybacks. A slice:
The Chamber is right to be wary of this anti‐buyback drumbeat. Stock repurchases occur when public companies buy shares of their own stock—distributing money to shareholders in exchange for reclaiming company ownership. As I have noted before, critics claim they come at the expense of productive investment and that they enrich executives by manipulating the earnings per‐share ratio. Combined, these effects are said to represent capitalism’s worst features: a short‐term unwillingness to invest driven by rampant executive self‐interest.
Such criticisms are misguided. When existing shareholders are compensated for their shares, these funds do not simply disappear. As my colleague Adam Michel noted earlier this year, one paper estimates that 95 percent of funds used for stock buybacks are reinvested elsewhere in the economy. What’s more, if critics are right that firms engaging in buybacks are leaving lucrative investment opportunities on the table, we’d expect the long‐run share price and earnings per share to be lower after buybacks.
A recent poll conducted by Chicago Booth’s Kent A. Clark Center for Global Markets demonstrates that 40 top financial economists are baffled by anti‐buyback hysteria too.
