Last week, in response to a NYT column by Greg Mankiw, I posed several questions about what I took to be holes in the column’s premise. Namely, that small changes in tax rates had outsized impact on human behavior. The questions also challenged the Harvard Professor (and former CEA chair)’s assertion that this marginal increase in tax rates would significantly reduce his incentive to work.

Rather than merely call the thesis nonsense, I instead posed a series of questions, the answers to which demonstrated how disengenuous the professor’s argument was.

This week, he responded. In an addendum. To “some blogger.”

If you thought the original column was disingenuous, check out the response:

Addendum: Some blogger named Barry Ritholtz poses a bunch of questions for me, which I won’t bother taking the time to answer. Unless, of course, he offers to incentivize me sufficiently. For free, however, I will answer one of them: “You teach at Harvard and live in ‘Taxachusetts.’ If state taxes are so important, have you considered teaching at Yale, and living in much lower state tax land of Connecticut?”

First of all, the top state income tax rate is higher in Connecticut than it is in Massachusetts.

Second, Yale? Are you serious? Yale?

The point, which Mankiw so deftly ignored, was that in the real world, people do not respond aggressively to minor incentives (such as marginal changes in income tax).

As to the corporate rate of taxation at 35% — this week, we learned that Google’s profit machine only pays 2.4% tax.
But as to his Connecticut comment, it was not only disingenuous — it was (mostly) wrong.

Before 1991, Connecticut had no income tax; Up until 2010, their rates were considerably lower than Massachusetts. The change in CT for 2010 is on income > $500,000 rate of 6.5%. So my point being that if marginal rate changes really impacted people’s behavior dramatically, then those incentives would have had him living in CT for most of the past few decades.

As to the actual tax rates, here is what I dug up from the intertubes:

Massachusetts Tax Rates
Income – 5.3%
Capital Gains 12%

Dividends 5.3%

Optional Tax Rate 5.85%

Income – 3 or 4 or 5%
Any income > $500,000 rate of 6.5%.
Capital Gains – 7%
Dividends and interest income are taxed between 1-14% (from 54k to 100k)

So prior to the recent change, the answer was that Massachusetts was appreciably higher than CT.

After the 2010 changes, the answer depends upon your gross income, as well as your cap gains. CT still has a lower tax rate for earner under $500k, and a lower effective tax rate for earners between $500k and XXX (try slapping that into a spreadsheet and see what the numbers are).

Even since the CT 2010 tax increase, the state you pay more in will be a function of exactly how much your income is and from what sources.

But the point is for the past 30 years, taxes were lower in Connecticut than Massachusetts, and yet he worked in Mass.

But forget Yale — if we are to really believe the thesis about marginal incentives, then what about Dartmouth? Consider New Hampshire’s tax rate is ZERO. The state has no general income, sales or use taxes. The only tax that would apply is a 5% tax on dividends and interest income of more than $2,400 ($4,800 for joint filers).

Thus, why is the good professor so motivated by a 3% change in marginal rates, but not a 5.3% reduction (plus elimination of a 12% cap gains) ?

There is yet another alternative explanation: Perhaps the chatter about his unwillingness to work due to the impact of a 3% increase in taxes is purely unmitigated academic balderdash.

Even at Hahvahd, they must know how to spell the word “bullshite” . . .

Category: Really, really bad calls, Taxes and Policy, Weblogs

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

94 Responses to “Updating Mankiw”

  1. dss says:

    His entire argument is bull. During the Clinton years when taxes were raised on the wealthy, their income didn’t go down (proof they were working less), their income went up (proof they worked at least the same if not more).

    Real family median income increased 14.8% during those years.

  2. doug says:

    I always get pissed when his website is called a blog. He at one time did allow comments. Then too many people took him to task about his statements, and he got ‘too busy’ to moderate comments and turned them off. What a wanker.
    Another good read about this can be found at: This is from a liberal arts guy that sees through his BS.

  3. Julia Chestnut says:

    What an @$$. If he taught at the University of Texas, he could be paying no state income taxes at all. Oh, but he’s clearly entirely too important a guy to teach for anything less than Haaaaaavahd.

    I figure you could probably buy and sell the guy.

  4. lalaland says:

    Thank you for picking up and running with his original BS (since it was a NYT oped and neither his site nor NYT oped’s have comments there was no responding to either by the common man). It drove me nuts to see all the inaccuracies (lies, whatever) he heaped on other inaccuracies in the original post. The man is simply not trustworthy with his figures, and it’s hard for me to understand how someone who plays so fast and loose with the numbers gets to stay employed, at Harvard no less.

    Mankiw was the perfect GWB operative – unafraid to look you straight in the eye and lie to make his point. I thought maybe with his sponsor out of office he would revert to truthtelling, but that’s obviously not in the cards. BR: please keep up the good fight against the truthbenders, and worse, those who feel perfectly at home just MAKING SHIT UP!

  5. Tarkus says:

    The blogs that don’t allow posts are when people want to talk AT you. They don’t want to hear opinions.
    The film “Inside Job” shows how the “mercenary academic mind” (oxymoron?) works.

    Sounds like Mankiw needs to be taxed at 150% for the negative externalities of fostering BS.

  6. pcurve says:

    Wow! The math he was using to project implication of tax increase made my broker look like Gandhi. $1000 vs 2000?

    Is this guy really a professor at Harvard? And what’s wrong with Yale?

    This guy is supremely out of touch with reality. I feel bad for the poor souls taking his courses at Harvard.

  7. S Brennan says:

    Apparently, intellectual honesty is not on the Harvard Professor’s radar, but his lie of omission is kinda vulgar for person of his esteemed position…perhaps Harvard can’t recruit Professors who are able to tell a straight story. Mankiw may want the lower taxes of Conn, but can’t make the ethical standards of Yale? After all, the Yale’s roots lie in 17th-century clergy, while Harvard was established by corrupt politicos.

  8. Julia Chestnut says:

    Yeah, pcurve, unfortunately famous professors are usually terrible. They have the spot because of their name, or some other notoreity — maybe they write well. But it is never because they are good teachers who are interested in working with students. In fact, they are hardly ever even remotely intellectually curious.

    I went to some pretty swanky schools, and learned pretty early on that the more often a person gets quoted in some well-respected periodical, the less likely it is that you will learn anything in their class. And the more critically important it is to regurgitate their views for them word for word on the exam if you want to score well.

  9. Being a DFH, I had little reason to take him seriously in the first place, but I want to thank BR for doing all the hard work that shows Mankiw for the idiotic tool he really is.

  10. “…I want to thank BR for doing all the hard work that shows Mankiw for the idiotic tool he really is.”
    -CJ and the 13th, above


    “…Several years later, President Woodrow Wilson would echo these sentiments in a speech to businessmen:

    We want one class to have a liberal education. We want another class, a very much larger class of necessity, to forego the privilege of a liberal education and fit themselves to perform specific difficult manual tasks.

    Writes Gatto: “Another major architect of standardized testing, H.H. Goddard, said in his book Human Efficiency (1920) that government schooling was about ‘the perfect organization of the hive.’”

    While President of Harvard from 1933 to 1953, James Bryant Conant wrote that the change to a forced, rigid, potential-destroying educational system had been demanded by “certain industrialists and the innovative who were altering the nature of the industrial process.”…”

    LSS: little wonder how those the caliber of Mankiw manage to find employ in our ‘educational’ institutions..

  11. Dennis the menace says:

    Meanwhile, I am impressed at the caliber of the people you are engaging in pissing matches with . . .

  12. franklin411 says:

    Awesome work, Barry!

  13. Apinak says:

    The real tell is his refusal to answer valid criticisms without being paid. This is someone who does care about truth, debate, or accuracy. He is pushing a position most likely because he has financial incentives to do so.

  14. bergsten says:

    Maybe he meant “some blogger” in the same way that old commercial said, “that’s some spicy meat-a-ball!”

  15. machinehead says:

    Quite aside from Mankiw and his disrespect to BR, I do find it appalling that northeastern tax-hell states impose their own stiff capital capital gains and inheritance taxes on top of federal bites.

    This was designed to be a federal country under sovereign states. Now most Americans have to satisfy two sets of tax codes (state and federal), and live under the double jeopardy of two sets of criminal codes (state and federal).

    This actually leaves us worse off in many respects than residents of proverbial nanny states such as those in Europe.

    Rationalizing that nasty state tax bites aren’t that important doesn’t help advance the cause of personal and financial liberty. Let my people go!

  16. DL says:

    Even assuming that Dartmouth is “chomping at the bit” to offer Mankiw a full professorship,
    I’m not sure that Mankiw’s reluctance to go there necessarily proves anything.

  17. Sechel says:

    To be honest B.R.
    The Anti-mankiw rant detracts from your frequently better pieces, and his argument did have an intellectual basis even though some of the failed to take into account that humans sometimes make decisions which are not in their economic best interest or maybe perhaps guided by other motivations. I’ve read his post and he strikes me as professor who motivates his students and has some interesting observations. A fresh break from the Krugman rants we hear too much of in the press.

  18. Transor Z says:

    Barry, you do realize that all you’re doing is making some kids pick classes with Larry Summers over Mankiw next term.

  19. DL says:

    Sechel @ 5:09

    Yes, yes, and yes.

  20. maynardGkeynes says:

    I’m pretty sure Mankiw referring to our host as “some blogger” was intended to be humorous, albeit, a bit lame in the attempt. The more important point is that marginal effects tend to be less pronounced when taxes are already above optimal, as they may well be now for people in Mankiw’s bracket, and possibly for two-income families making $300K or more who are working 80 hours total a week to get there (have you noticed how many part time married MD’s there are?). So saying that a tax increase would not change Mankiw’s behavior misses the point — his behavior has already been changed. Let’s say, just for the sake of argument, that 25% is the optimal tax rate in terms of incentivising hours worked. Going from 25 to 28 should have a significantly greater effect than going from 35 to 38. Why? Think about going from 95 to 98 — the impact will be virtually nil, because you have long ago reached the point where the previous tax burden has meant that non-monetary factors have taken over. Now it could be that 38 is the optimal rate — but that’s a different question, and I Mankiw confused his argument by using himself and his tax bracket as his example.

  21. wunsacon says:

    Well done, BR.


    >> During the Clinton years when taxes were raised on the wealthy, their income didn’t go down (proof they were working less), their income went up (proof they worked at least the same if not more).

    Clinton raised taxes on the wealthy? I don’t remember that. In fact, he cut capital gains taxes on homes, signed derivatives deregulation, and helped start the bubble. If he “raised” taxes, he more than offset that disincentive by giving the like of Chuck Prince plenty of reason to “get up and dance”.

    And as to the fact that incomes didn’t go down, people worked harder — and incomes indeed went up — during that time mainly because the internet bubble generated supernormal opportunities and incomes.

    (I’m *not* siding with Mankiw here. I just don’t think we should hold up Clinton’s policies as evidence here. Too many coincident factors.)

  22. wisedup says:

    that reply is the best he has?
    his lies are called out and he comes with exactly nada!
    My recommendation: Yale over Harvard

  23. Sechel says:

    So why are the Harvard and Princeton guys arguing so much?
    There have been many articles by Rogoff, Mankiw & Rajan taking a view against the Krugman/Fed camp and the response back sounds almost visceral.

  24. wisedup says:

    for maynardGkeynes
    you are advancing nothing new. The truth of the matter is that the people like Mankiw are complaining because they are unable to reinvent themselves and do more productive work. He should be smart enough to realize that if he wants twice the pay for half the work he’s going to have to shift to a more demanding job. It is really sad to see someone who doesn’t get it.

  25. Darkness says:

    Well, you are some blogger, as in: that Barry is SOME blogger!

    Very satisfying ongoing posts.

  26. soloduff says:

    BR, thank you for your straightforward, empirical refutation of this pretentious little ignoramus. Mankiw knows everything about neoclassical economics, which means he knows nothing about economics and everything about rationalizing the latest greed-inspired policies emanating from our real rulers, who just happen to be Mankiw’s ultimate employers. A generation ago Gore Vidal penned a Swiftean satire, “The Hacks of Academe,” making the point that Mankiw’s genus is ultimately a question of Supply and Demand. It’s not hard to see who demands Mankiw’s drivel–check his resume–and he is employed by one of the most prestigious supply centers of same. He is evidently quite good at what he is paid to do. Josh Billings was referring to folks like you, BR, when a century or so ago he wrote, “As scarce as truth is, the supply has always been in excess of the demand”–which is one reason, I suspect, that you exhibit such ferocity toward the ruling confusion. You are not cynical; your anger bespeaks hope for improvement–an improvement that, in my judgment, is not in America’s future. The problem with futile anger is that it tends to fester into resentment, a parlous psychological state.

  27. dss says:


    The problem with “coincident” factors is that people tend to cite them when it supports their argument and dismiss then when it doesn’t.

    You don’t remember the Omnibus Budget Reconciliation Act of 1993? That is the bill that every single Republican voted against. Perhaps you are too young to remember it.

    * It created 36 percent and 39.6 income tax rates for individuals in the top 1.2% of the wage earners.
    * It created a 35 percent income tax rate for corporations.
    * The cap on Medicare taxes was repealed.
    * Transportation fuels taxes were raised by 4.3 cents per gallon.
    * The taxable portion of Social Security benefits was raised.
    * The phase-out of the personal exemption and limit on itemized deductions were permanently extended.
    * Part IV Section 14131: Expansion of the Earned Income Tax Credit and added inflation adjustments

    Historical Effective Federal Tax Rates for All Households

    Note: The effective tax rate paid is far more accurate of a statistic than actual tax brackets, but the taxes rates were definitely increased on the top 1.2%.

    It doesn’t matter what the caused the increased economic activity, the fact is that despite taxes being raised on the wealthy, incomes continued to grow.

    We are discussing income taxes, not capital gains, derivatives deregulation or the bubble. Please stay on topic. Your reference to Chuck Prince doesn’t make sense nor is it germain to the conversation.

  28. dss says:

    Where Mankiw gets it wrong is that he uses his own person situation and extrapolates it to the economy as a whole rather than looking at the entire economy.

    Where his arguments fall apart is that he conflates the time it takes to earn more money with a tax disincentive. “I won’t do this job because of the impact of taxes would lessen it’s value to me” which is bogus. People don’t work more because of the time involved, not the tax rate. No one can buy time. Not everyone responds to incentives in the same way despite that what he is trying to claim.

  29. Joe Friday says:


    “You don’t remember the Omnibus Budget Reconciliation Act of 1993? That is the bill that every single Republican voted against.”


    The reaction of the American RightWing in August of 1993, when the Clinton administration’s budget & tax legislation was passing through the Congress:

    * Stephen Moore, director of fiscal policy studies at the Cato Institute , predicted that “Clinton’s plan will torpedo the economy”.

    * “The tax increase will kill jobs and lead to a recession” said Newt Gingrich, “and the recession will force people off of work and onto unemployment and will actually increase the deficit.”

    * Sen. Phil Gramm (R-TX), a claimed economist, said “I want to predict here tonight, that if we adopt this bill the American economy is going to get weaker and not stronger, the deficit four years from today will be higher than it is today and not lower … When all is said and done, people will pay more taxes, the economy will create fewer jobs, the government will spend more money, and the American people will be worse off.”

    * Rep. Dick Armey (R-TX), another claimed economist, labeled the Clinton economic plan “a job killer”.

    * Another strident opponent of the Clinton administration’s economic legislation was Rep. John Kasich (R-OH), who said “This plan will not work. If it was to work, then I’d have to become a Democrat…” (Still waiting on that conversion)

    * Sen. Pete Domenici (R-NM), said “April Fool, America. This Clinton budget plan will not create jobs, will not grow the economy, and will not reduce the deficit.”

    Of course, they were all DEAD wrong.


    * It created 36 percent and 39.6 income tax rates for individuals in the top 1.2% of the wage earners.
    * It created a 35 percent income tax rate for corporations.
    * The cap on Medicare taxes was repealed.
    * Transportation fuels taxes were raised by 4.3 cents per gallon.
    * The taxable portion of Social Security benefits was raised.
    * The phase-out of the personal exemption and limit on itemized deductions were permanently extended.
    * Part IV Section 14131: Expansion of the Earned Income Tax Credit and added inflation adjustments”


    * Enacted a $500 per-child tax credit for 27 million families with 45 million children.

    * That expansion of the Earned Income Tax Credit, which provided tax relief to 15 million hard-pressed working families, lifted 4.1 million people out of poverty and into the Middle-class.

  30. huesos says:

    I don’t think it can be argued however that retired people don’t rely heavily on tax rates to determine in which state to retire. How else to explain why NYS has lost 1M inhabitants in the past decade? I plan on fleeing the state the day after I retire. Would a percent or two difference in rates determine where I move to? Absolutely not, but I have no intention of paying confiscatory tax rates when the location of a high-paying job is no longer a factor.

  31. Joe Friday says:


    “I don’t think it can be argued however that retired people don’t rely heavily on tax rates to determine in which state to retire. How else to explain why NYS has lost 1M inhabitants in the past decade?”

    The climate ?

  32. Joe Friday says:

    “As to the corporate rate of taxation at 35% — this week, we learned that Google’s profit machine only pays 2.4% tax”





    Ah, 35% of nothing is, nuthin’ !

  33. sdonova says:

    I still think the professor takes himself too seriously – if he doesn’t write articles to impress himself with his brilliance someone else will write his or her opinions on the same subject – someone who may be even more intelligent and make more sense than he does!! So does he really think most of us care if we are deprived of his opinions?

  34. StatArb says:

    pissing match between 2 Einsteins ?????

  35. VennData says:

    Ritholz -1 / Boykiw -0

    Looks like the soft-spoken fella from Hahvahd who called McDonalds a manufacturing business…

    …was in over his head dealing with the real world in the acclaimed Bush administration.

    Bush’s experiment, the second in Supply Side Economics – where tax cuts pay for themselves – was quite a success. Does your chalk board do trillions?

    Thanks for your public service, Boykiw, …you prancing court jester for the right wing.

  36. VennData says:

    Hey Boykiw, why don’t you let people comment on your blog like Barry Ritholtz does?

    What are you afraid of? Data? Facts? Trillions? McDonalds assembly line workers?

    Let me know when you accept transparency. I’ll shred you too, you pointed-headed dork.

  37. ToNYC says:

    Professor Mankiw is his own best argument for an exponentially progressive income tax. All there is to do is not pay him too much and he gives up. He’ll be on the Harvard dole until they box him up.

  38. Tarkus says:

    “Even at Hahvahd, they must know how to spell the word “bullshite” . . .”

    I think he pronounces it “Bushit”…

  39. Bruman says:

    Great work Barry. I forget, did your blog rank higher than Greg Mankiw’s in popularity? I find the dismissal of you as “some blogger” to be an indication of dismissiveness that shows that he’s a little wraped up in his own world.

    I think there is a behavioral issue of framing and misdirection on this tax issue. He sees that marginal tax rates go up, thinks about his supply and demand curves, and then concludes that people will work less because of it, therefore he concludes that HE should work less because of it. Yet his own revealed behavior shows that he doesn’t actually consider tax rates much – something you were very good to point out.

    If you ask him why he doesn’t work more, he’ll probaly give you a different answer, which is about time with his family or competing options or the fact that he likely has enough money to supply his immediate needs. Taxes probably doesn’t figure into it.

    Something similar happens when you call up businesses and survey them. If you ask them, “are you reluctant to hire because of uncertainty about taxes and health care,” and business owners will focus on those uncertainties and say “yes, that’s why I’m not hiring.” But you turn around and ask another one, “are you reluctant to hire because of uncertain demand for your products,” and they will turn around and say “yes, that’s why I’m not hiring.” All they really know is that they are worried about hiring, if the surveyor supplies a reason, they will latch on to that. (And there are plenty of investing examples too.)

    The truth is that if a small business hires someone, the first thing that will happen is that their taxes will go DOWN! Down? Why? Because the first thing that happens when you hire someone is that your expenses go up and your profits go down. Fewer profits -> lower tax bill. If lowering taxes were the primary motivator of all business, then the best way to do it would be to hire more people ASAP.

    But of course it is not lower taxes, but greater profits that actually motivate businesses. Hiring people will initially lower the tax bill, but at some point, the additional revenue (assuming the worker is productive) should cover the cost of business, and then taxes will increase. But the only reason that taxes will increase is because profits are increasing.

    Now, at the margin, some businesses which are barely profitable might become unprofitable because of the new tax schedule. However new businesses that have less than 250k in profits will be just as feasible as they were before.

    The truth is that the businesses that truly create value – the Microsofts, Apples, Amazons, Ford (from another era), are not created by people who are obsessed with a percent or two of tax increases, they are created by entrepreneurs with a desire to create the best products they can for their customers.

    The organizations that are obsessed with managing the tax rate are those which have become large and bureaucratized, the very same ones that spend more time trying to streamline operations by eliminating headcount, rather than the small dynamic ones that are trying to innovate, grow, and increase it.

    I am all in favor of tax credits for small businesses, and if 250k is too low a profit threshold, then perhaps one should make tax credits for small businesses up to a higher amount, such as $1MM or so, or some number that scales based on the number of employees.

  40. philipat says:

    “Some blogger”? Arrogant prick.

  41. [...] can’t ignore this anymore, Barry Ritholtz at Big Picture has been trading fire with Greg Mankiw over his New York Times article I referenced here.  In his latest offensive, [...]

  42. Michael says:


    I thought Mankiw’s response to you was perfect. :) I just want to let you know that unlike most of the posters here I think you are the one off base on this issue. Mankiw is correct in his analysis.



    BR: Thank you Michael. Now, what is the thought process for selecting X over Y? Would you be so kind as to articulate the reasons why you selected one over the other? You don’t have to show your work, but I believe readers (and I) would appreciate your comment even more if we had a basis for understanding your logic and analysis . . .

  43. wunsacon says:


    >> We are discussing income taxes, not capital gains, derivatives deregulation or the bubble. Please stay on topic. Your reference to Chuck Prince doesn’t make sense nor is it germain to the conversation.

    Are you saying (a) bubbles don’t affect incomes and (b) capital gains taxes aren’t taxes?

    Seemed germane to me… Again, despite minor increases in tax rates, the dot-com bubble gave many people the opportunity to “win the lottery”. If it weren’t for the bubble, hypothetically people would have worked less — thanks to those higher taxes — as Mankiw alleges. I don’t think the Clinton “record” helps refute Mankiw, especially if you’re trying to persuade independents or right-wingers.

  44. jlounsbury59 says:

    Barry – - -

    Some people are interested in intellectualo exchange with others. I put you in that category. Other people are interested in intellectual exchange with themselves.

  45. The course book for his class, that he authored, “Principles of Economics” lists for $229.95 and is in its 5th edition. His book “Macroeconomics” is in its 7th edition. When does a basic economics book need to be updated seven times? I have to take the guy at face value he does everything for money.

    Why else would you make continuous tweaks to a course book if not to force the students to buy the latest one and line your pocket. The irony of lecturing a bunch of fresh young faces about economics while you help pile them with debt, what a guy, what a system.

  46. mcknz says:

    My favorite part is that he says “I won’t bother taking the time to answer,” and then immediately does the opposite. He tries to be dismissive yet at the same time wants to defend himself. If he really didn’t give a shit he just wouldn’t have brought any of it up, so clearly BR got under his skin.

  47. FrancoisT says:

    Mankiw’s social situation is yet another symptom of how bad this nation is crumbling apart. Here we have a total asshat, who can’t even engage in discussions on his own “blog”, is snobbish and dismissive of whomever question him, yet is a tenured professor at an Ivy League institution, earn a load of moolah in side activities, yet, cannot be bothered to produce real, actionable intellectually robust work.

    But when it comes to shilling for the Feldwebels of Das Kapital, zee Obergefrieter is ready to yell “Acthung!”

  48. JOJOGREENJO says:

    At least he admits that tax cuts do not increase tax revenue and labels those who say otherwise as cranks.

    “I used the phrase “charlatans and cranks” in the first edition of my principles textbook to describe some of the economic advisers to Ronald Reagan, who told him that broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue. I did not find such a claim credible, based on the available evidence. I never have, and I still don’t.”

  49. dss says:

    Pay attention, wunsacon. The topic is not about capital gains or bubbles. If you want to discuss those issues then you need to start your own blog and have at it.

    I am not trying to persuade anyone; I was merely stating the facts. During the Clinton years, income at all levels increased despite tax increases on the top earners. Mankiw is ignoring the facts because he is paid to justify why taxes should not be raised on the top earners.

    You were the one who didn’t know that Clinton raised taxes on the wealthy, so I am not sure that you have enough information to make any comments about the topic, much less expound about the Clinton record, or Mankiw’s ridiculous assumptions.

  50. dss says:


    Mankiw is a hypocrite and a paid shill.

  51. cheapy says:

    Personally, even though I’m gambling for a living anymore, I’m likely to leave here and move to a no income tax state. Its not like the services are any better here, there, or anywhere, so I might just as well be someplace that’s both nice and inexpensive to live, and state/local taxes are a easily $10,000 and more likely $20,000 per year, so its not insignificant.

    That not withstanding, his insults show a lack of class.

  52. cheapy says:

    And yes, I’m looking at leaving the country, too. I mean honestly, anyone that makes any money might as well have a target on their backs here in the USA anymore, and its certainly NOT going to get any better. We are at the point where they are WANTONLY debasing the currency just to make things look better, and borrowing an absolute fortune to do so.


    If you are sitting at a table playing poker and don’t know who the “sucker” is, its you…

  53. ywsimw says:

    Great work, BR !

  54. V says:

    Where for art thou keys to his ivory tower/asylum?

    So now we just are in need of some adequate ‘incentives’ to get him to answer?

  55. philipat says:


    Incidentally, if you leave the country, you still need to file a 1040 and pay US taxes. Unlike most other civilised countries, where if you live overseas you have no tax liability, on the reasonable assumption that if living overseas, you are making no demands upon public services, which are the reason for paying taxes.

    As a US citizen, the only way you can escape the burden is by surrendering US Nationality.

  56. Expat says:

    Barry, how unfair of you to call bullshit on Mankiw. For God’s sake, he is a professor at Harvard. What will become of the world if we start questionning people like him or turning out free-thinking graduates?

    But seriously, Mankiw’s reaction was a bit shocking. It’s the sort of thing one expects from Fox News or the Tea Party, not a “respected” educator at a top university. It would have been understandable if you had said he was exaggerating his opinion to make a point, even though that would be academically unacceptable.

    People don’t like having to prove their beliefs. Mankiw believes in certain things and doesn’t want them challenged or held up to the mirror of reality. Is letting Mankiw get away with this any worse than not calling bullshit on the Pope or any religious leader? Don’t bore the Pope or Mankiw with annoying details like facts and statistics. It only makes them angry.

  57. The Manual of Ideas says:

    Seems to me Mankiw is exactly the kind of academic who loves to hide in the Ivory Tower because he can’t cut it in the real world. Why should anyone listen to him about how the latter works? The vapidity of his line of thinking is astounding.

  58. ToNYC says:

    Kenneth Dart, who produced multi-billion tons of styrofoam for mostly single human use and then sea-bird food Forever, keeps trying to take it all with him and pay no such taxes or remediation for the waste he created for his immediate benefit…. I can only predict he will find an understanding ear in the Congress of wUnderlandS. There is still no enviromental compensatory tax on the styrofoam stuff that is now the asbestos of the ocean.

  59. ste4ve says:

    How about a new term for someone who propagates highly questionable or demonstrably false financial/economic information? I.e, a Manker

  60. hoofin says:

    I thought Mankiw’s argument was very embarrassing. I felt ashamed for him, especially since his name is on a major textbook in economics.

    Everyone knows that taxes affect relative prices. But there was no discussion about how the $1,000 was really an inflated fee to begin with. If we had a system of no income taxes, people would not bid so much for their labor. Mankiw wouldn’t be offered the $1,000 to begin with, because other professors would have underbid him for less. If Mankiw’s talk is something for which people feel there is no substitute (unlikely after that NYT piece, unless you want to pay a premium for B.S.), he might still command the $1,000. But otherwise, he might only get $300.

    In Mankiw’s imaginary world, I’m not sure how you get an economy to function at all, especially since there is no money to pay for infrastructure. For instance, the internet. Without taxes, you don’t have a farflung military to protect the offshore places where companies like Google hide their profits from tax. But that aside. I think everything he said after the confiscation argument just fell flat with anyone who thinks. Most people have nothing left over once they pay the bills. Why should Mr. Mankiw, who works for a major nonprofit sitting on a $25 billion (tax-free) endowment, think he should have it any differently?

  61. jeg3 says:

    BR, Great double post.

    Another incentive to raise taxes, Mankiw will stop working!
    “Several universities to avoid if you want to study economics”

  62. midasw says:

    Leave us not forget that Mankiw is the beneficiary of one of the biggest, most unforgivable rackets in the country: the sale at inflated prices of generally pointless textbooks to college students. He ought to be taxed on this income at 90%.

  63. Mankiw is the same guy who in 1998 wrote: “Current patterns of taxes and spending are unsustainable.” (See: He is one of the debt-hawks who repeatedly tells us the government is going broke, and who repeatedly is proved wrong. It seems that making wild-ass predictions, and never being accurate, is a formula for fame and fortune in America.

    Rodger Malcolm Mitchell

  64. Tarkus says:

    Harvard is starting to appear to be a shill University. When an “economist” who was part of an Administration that helped put in into the Second Great Depression has the nerve to have an elitist attitude as if he actually accomplished anything good, it’s a pretty poor reflection on his sponsors.

  65. nl says:

    The question is not really whether one person or all people or most people react to a certain tax change. The question is whether there is someone “on the margin” — let’s say 1% of people — who react. For example, if 1% of people react to a tax change by stopping certain productive activities, or going somewhere else, or doing other things instead, then maybe the economy would decline by 1% — which is a pretty big decline, actually. That one person might not even be aware that they are “reacting to a tax change.” It is just the “last straw,” the little bit that makes them feel that it would be more worthwhile to do something else. When they sum up all the factors — probably not even thinking about tax rates specifically — they make slightly different decisions than they might otherwise. They decide to become a government employee instead of an entrepreneur, that sort of thing, or maybe Dartmouth isn’t so bad after all.

    I get the impression that Ritholz knows a lot less about what he’s talking about than he thinks he does. People who are newbies should really not swan around like they know what they’re talking about.

  66. Just_Ed says:

    I guess I am in the minority but I agree with Greg. The rich have suffered enough! It’s taken them almost two years to get back to where they were at the height of the frenzy. The poor have food stamps. Shouldn’t the wealthy have the tax code?

  67. diogeron says:

    During the 8 years Clinton was president, when the top marginal tax rate was 39.5%, 22 million new jobs were created. Under the Bush tax cuts, in 8 years, 1 million jobs were created with the top marginal rate of 35%. Of course, the top marginal rate was much, much higher under Reagan for the bulk of his two terms. In short, the argument that there is a causal relationship between jobs and the economy is, prima facia, suspect.

    Barry’s right. Mankiw’s wrong.

  68. rl_indy says:

    From an economic perspective if a business or person chooses to exit a market without maximizing profits (working less), new business would be attracted into these markets for the remaining profits and thus increasing competition and possibly creating a more normal income/profit distribution.

  69. Thor says:

    wunsacon – “during that time mainly because the internet bubble generated supernormal opportunities and incomes.”

    False – this has been covered at length in numerous other areas. I don’t know what version of the 20th century you were living in, but in the version I lived through “the internet bubble” didn’t happen until well into Clinton’s second term.

  70. Bob_in_MA says:

    Barry has a very hard time with easily verifiable facts.

    There is a 12% rate here for short-term capital gains, long term gains are taxed at the 5.3% rate.

    But one area where taxes are generally lower here than the rest of the northeast is property taxes. Since proposition 2 1/2 in the 1980s, a town can only raise its total tax take on all existing property 2.5%/year. When home prices were rising 10%/year, property tax rates here were falling 7%.

    This is a high-tax state compared to Texas, Georgia, Alabama, etc., but not compared to Connecticut or New Jersey, and certainly not compared to someone who commutes to NYC.

  71. Bob_in_MA says:

    Just for the record, I think Greg Mankiw’s argument is tired nonsense. But I find Barry’s sloppy use of data equally tiresome.

  72. I vote against Barry on this one, but not because I think he is wrong. If the vast majority of economists who failed to predict/prevent/warn us against this current financial disaster could be persuaded to work less with a 2% tax increase, we should push the rates up by another 2%. Please stop working so hard, Professors Henderson/Mankiw – we cannot afford your knowledge any longer.

  73. Permabear says:

    Greg Mankiw and all the rest of the economists putting together and helping to implement the economic policies of George W. Bush have lost all credibility. The George W. Bush era will go down in history as one of the worst since Herbert Hoover. It wasn’t all Bush’s fault of course because the policies that led to the meltdown were decades in coming, and in my view really started with Ronald Reagan. But ultimately it was deregulation, debt and derivatives, what I refer to as the 3 Ds that caused the mess. And they can all be associated with conservative economic policies. The housing and credit bubble exploded during the Bush era, when Mankiw had an influence on policy. The Bush tax cuts were the most fiscally irresponsible policy to implement in advance of the retirement of the baby boom generation as could be possible. Greg Mankiw has no credibility left on the issue of taxes, or for that matter on anything economic.

  74. JerseyCynic says:

    All taxes are not created equal.

  75. mbelardes says:

    “Unless, of course, he offers to incentivize me sufficiently.”

    I guess there’s no value in preservation of credibility these days…

  76. cheapy says:

    Here in Illinois, if they raise the income tax, I’m selling the house and leaving. It doesn’t matter how much I do or don’t get for it, because we can buy a house somewhere without the high taxes at just as beaten down a price.

    I get tired of paying big bucks in taxes so others can collect. Why is it Buffet only pays 15%?

    The real problem is unemployment. The wife and I are both unemployed. If you took that $40+ billion a month of trade deficit, and instead of importing everything, balanced it and had to actually hire Americans to make things and support the making of things, you could reduce unemployment dramatically.

    Divide that $40 billion a month by 20 million unemployed, and surprise, its about $2000 a month per unemployed person. Google “Warren Buffet Import Certificate plan to balance trade” for a way to do it. Let the government phase it in over time, starting with selling $36 billion a month of certificates, and decrease it by $1 billion each month for 36 months. The money raised by selling them can be used to offset the deficits caused by the unemployment, and as the government sells fewer certificates into the market, the prices bid for the ones earned by exporters will rise, offsetting the high labor, tax and overhead costs here in the USA, enabling them to sell more abroad, and hire more Americans to produce those goods. Yes, imports would cost more, but you wouldn’t need to raise taxes or debase the dollar to keep this huge ponzi scheme going, and might leave less of a huge debt burden to our children as a result.

  77. afeltus says:

    Not to argue your point because the key phrase is “At the margin.” Do I work an extra hour? When do I take my capital gains? Do I convert to a Roth IRA?

    However, your credibility is hurt because you have bad information on Mass tax rates. cap gains are taxed at regular rates while dividends and interest are taxed at the twice the regular rate. But this understates the complexity and cost because it takes me twice as long to do my state taxes as the federal taxes. And this time cost is a dead weight cost. noone gets a benefit from those costs.


    BR: Making it less likely that small changes in the rates will dramatically impact your behavior.

  78. wunsacon says:

    >> Mankiw is a hypocrite and a paid shill.

    DSS, I agree with that. But…

    Clinton raised taxes by a few percent? Okay. But, he (a) gave people an effective 0% tax rate — down from 25%+ — on homes (their biggest investment) and (b) lowered the cost of credit artificially by deregulating derivatives. Mankiw could argue that these incentives — tax reductions — more than offset the smallish tax increases and encouraged people to engage in more economic activity than before. What’s your response?

    Hopefully, your response isn’t a repeat of “that’s not relevant” and “get your own blog” (which is ironic considering that your handle links to Andy T’s website and isn’t yours).

    Also, oil was less than $20/barrel during the Clinton years. When less money is going offshore, don’t you think the economy performs much better? Talk about a favorable wind.

    BTW, in contrast to your arguments, I prefer what Barry did: use Mankiw’s own personal choices as a “case study”.

  79. toddie.g says:

    CNBC was only too happy to have Mankiw on Squawk Box so Joe Kernan could be lapdog that he is, pitching softball questions to Mankiw that only a shill like Sean Hannity could truly admire.

    As usual, had to turn CNBC off. No journalistic integrity there except tuning in for Strategy Session with Faber and Kaminsky.

  80. [...] on the other hand, is not one to avoid debate.  Here he addresses Mankiw’s dismissive addendum.  By the way, Ritholz is the author of Bailout [...]

  81. Liz says:

    Even as I type my husband is looking for work out of state because the taxes in CA are killing us.  He makes more than $200k and we are renting a condo.  Everywhere else we have lived we have paid cash for our homes.  Further I do not work because I can’t keep any of the money anyway.  My sister moved from silicon valley to WA state due to high taxes.  Don’t kid yourself, taxes do matter very much.  The problem is that often people are in specialised jobs where they are stuck in expensive places lia CA and MA.  Given the same conditions elsewhere most will jump sip in a heartbeat.
    Someone we know is right now trying to set up a 3D animation shop in China because it is cheaper.

  82. Its not that taxes don’t matter — everything matters

    But in the real world, a 3% change in a tax rate up or down isn’t going to stop real people from working. 

    I was going to take a $10,000 speaking gig, but gee, that 3% bump in taxes — an extra $300! — simply makes it not worth it.

    That’s a ridiculous argument 

  83. wisedup says:

    well Barry, ridiculous arguments are well liked by ridiculous people

  84. JerseyCynic says:

    But in the real world….

    he’s an out of touch @$$

    I just want to slap people like that. If I were fortunate to have the education he has, I’d be more than happy to share what I had learned with anyone who wanted to listen.

    Don’t give him a another thought Mr. Ritholtz

  85. lalaland says:

    Last one in is a rotten egg!

    My biggest problem with the Mankiw nonsense (other than his estate tax nonsense) is this:

    When Krugman, etc. argue against preserving tax cuts for the rich they claim it’s because the rich are more likely to save than spend the money. This is what we hear every time a Republican takes the stump and starts saying he will promote tax cuts to heal the economy. What’s the point of Mankiw’s article? That increasing his tax rate will REDUCE THE SIZE OF THE NEST EGG he wants to create for his offspring. That’s pre-cisely! the reason he should not be given a tax cut/lack of tax hike!

    We don’t want money flowing to those who will save, we want it flowing to those who will spend, so the spending stimulates the economy. He proves, through his touching anecdote, the wisdom of the very tax cut/increase he’s decrying. What kind of logic is that?

  86. chris says:

    Barry you are to much. Love your questioning, it reminds me of the old Perry Mason line of questioning. Cheers.

  87. djiddish98 says:

    How about offering to buy his text book in order to provide enough incentive to answer the responses.?

    Or you could just pay him directly to try and get the responses out. Agree on an hourly wage and he can bill you in 15 minute increments. It shouldn’t take more time than an econ 101 midterm to complete.

    I think you have him in a nice corner here.

  88. toddie.g says:

    BR, the link to Google’s 2.4% tax rate article was broken. I did find it elsewhere, and for those who also had problems, it’s here:

    Please give us lots more commentary on how some of our largest corporations don’t pay anything close to the ostensible 35% corporate tax rate.

    I note that Apple, IBM and Oracle are all using this tax loophole, according to the article.

  89. Dexter says:

    I’m kind of impressed. His lies are free, but he wants to be paid to answer for them.

  90. ToNYC says:

    @Liz Says:

    …”Someone we know is right now trying to set up a 3D animation shop in China because it is cheaper.”

    They should let you do it for nothing because the IP you develop there will be on sale across the street
    before you get “your” production out your Chinese door.

  91. EconoBob says:

    The most irritating thing to me about the Mankiw article is the sheer preposterousness of the counterfactural: EITHER a) Mankiw and his heirs face NO federal or state taxes and also receive a consistent 8% (real?) rate of return for 30 years, OR b) Mankiw exercises terrible tax planning, pays the highest marginal rates at every turn, and is careful to invest in tax-inefficient stocks, before turning over the asset to his children.

    The analysis should focus on the marginal difference between a) the tax regime WITH the Bush tax cuts and b) the regime WITHOUT the Bush tax cuts (shall we call that the Bush tax hike? He signed the bill). But that would dramatically shrink the size of his straw man! And, of course, there is the little problem that Prof. Mankiw and his wife can transfer up to $22,000 per year (subject to some lifetime constraints) to each of their children and completely avoid the estate tax issue. Yes, his marginal tax rate probably goes up–but by maybe 5%. So that’s a difference of $50 up-front in the amount Mankiw can transfer to his children now. The estate tax is a complete red herring. Mankiw implies (though does not quite say) that expiration of the Bush tax cuts costs his children $9,000.

    Mankiw’s a smart guy. Writing like that makes me think he takes us all for rubes. This isn’t serious analysis.

  92. ThePlainsman says:

    His headline for that article begs the question, “Is is possible for a college professor to actually work less?” Ha. What a typical snobbish response. I wonder if he really considers himself “upper middle class”? I’m going to guess people making 100k a year are lower middle class to him. There’s something to be said about someone who knows better trying to pull what he’s pulling–and it’s not flattering.

  93. [...] on the other hand, is not one to avoid debate.  Here he addresses Mankiw’s dismissive addendum.  By the way, Ritholz is the author of Bailout [...]