Utility Maximization and Progressive Taxation

This post was going to focus on marginal utility of money as an argument for increasing the progressivity of tax policy, but I decided that since there is a large body of literature to which I could add virtually nothing I would instead cheer myself for finally getting my CDs organized. Mrs. LaBlog deserves most of the credit for this.

If you really need some economics talk, then I will give you some. The view that I have, which is shared by most liberal economists in the world, is that one consideration of tax policy, aside from revenue-generating capacity and economic efficiency, is total well-being of the society that is effected by the policy. The unit of well-being is the utile. For most policy analysis we use money as a proxy for utiles, which is something we often forget. The basic idea which can be fairly easily demonstrated is that as one's wealth or income increases, one gets a smaller amount of utility from each additional dollar. This is diminishing utility of money. This becomes a pretty simple argument for progressive taxation. We tax higher earning individuals at a higher rate than lower earning individuals in an effort, primarily to fund expenditures but also to result in a fairly equal lose of well-being to those with the burden of taxation. Again, this is an overly simplified description of a complex concept.

One more economics related point: undergraduate economics is borderline useless. What a person learns in those courses is a series of theories that are each told as the truth without much mention given to the interplay of these theories. Price floors, like the minimum wage, will theoretically reduce consumption of a good as the price adjusts to the new market restrictions. In the example of a minimum wage, unemployment will theoretically increase as workers are priced out of the market. This assumes a perfectly competitive market and full information. The data suggest that, rather than increase unemployment, past minimum wage increases may have actually increased employment because the labor supply curve might not be linear. An basic understanding of economics is a good thing, however, it is important to remember that this is a complex field that requires critical thinking.

Chuck Shumer is an idiot

Maybe I am too since my fingers refused to correctly type "idiot."

I'm trying to figure out how the Senator from NY is going to go about cutting school property taxes in half. I'm confused about why he would want to cut school property taxes in half. I guess he wants to weaken the connection between property wealth and school finance, but the states all have reasonably effective policies for doing that. The policies aren't perfect because they typically don't allow for negative aid to particularly high property wealth districts, but they do result in a situation in which we approach access equality. It's pretty clear from doing the math that the Feds increasing grants to school districts would serve to further reduce disparity and if the Feds mandate a cut in school property taxes that is accompanied by an equally large grant, then that would be okay, I suppose. The real issue is that people hate the property tax and proposing to cut property taxes is particularly popular. Unfortunately, the Feds aren't likely to make up the lost revenue in grants which will require school districts to raise sales or income taxes, or create entirely new taxes. It's not clear that state legislatures would pass legislation allowing for local income taxes (it damn sure wouldn't happen in Texas), which means a sales tax increase. It doesn't seem to me that the traditional democratic agenda involves replacing mildly progressive taxes with highly regressive taxes. Maybe New York Democrats are different.

I have a pair of white sneakers

This is very unlike me, but I purchased a pair of white sneakers.

Christmas is all about kids

We gave our nephew a jersey and a sword.

Damn

I'm really bored.

Flooding. Yay!

Mrs. LaBlog spent today unpacking and repacking our closet because the recent storms have brought a closet full of water. It is not awesome. Nothing too exciting was ruined. We lost two of our little round Ikea rugs and we'll have to hope that we can get the stank water out of some clothes that had made their way to the floor. A piece of artwork that was on loan may also have been destroyed. It only costs $500, so no problem there. Damn. We did manage to get an eight quart Calphalon multi-pot today. It is a stock pot with a pasta insert as well as a steamer insert. We made tamales tonight. They were the Central Market pre-cooked kinds, so it only took 15 minutes of steaming as opposed to an hour or two. So, that worked out. We're also the proud owners of six new bins. Super.

I'm all Biblical and whatnot

My mom sent me this link which will tell you the Bible verse for your birthday. This is mine.

2 Corinthians 9:7 NIV
Each man should give what he has decided in his heart to give, not reluctantly or under compulsion, for God loves a cheerful giver.

Go Bears

According to NFL.com, I should be cheering for the Bears in the playoffs. I'll go with that.

I cheered for Wisconsin over Arkansas in the Capital One Bowl. I feel very guilty about that, seeing as I grew up in Fayetteville and my parents both work for the University of Arkansas. But, the University of Wisconsin gave me a degree.