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Tuesday, October 12, 2010

Greg Mankiw is threatening to stop working (again)

Two years ago, Greg Mankiw threatened to stop working if Obama was elected, basically on the theory that his tax rates would go up and his incentives would thereby go down.  It was one of those "Going Galt" threats that looks ridiculous in retrospect.  Mankiw, of course, is still a professor at Harvard.  But he has stopped working in one respect -- he's recycled that old blog post into an op-ed for the New York Times.  A few thoughts:

  • First, if you're looking for reasons why the print media continues to lose importance and market share, compare this and this.  The New York Times essentially ran a two-year-old blog post in its Sunday edition.  I can't even really blame Mankiw for this -- where are the editors?  In fact, I think Mankiw's op-ed is an elaborate inside joke on his part.  "Two years ago, I threatened to stop working.  And I made good on that threat!  Of course, if people want to pay me for not working, I'm happy to accept it, even with higher taxes.  I just won't do any new work."
  • I'm willing to offer the Times this two-year-old blog post, which was my response to Mankiw's original post.  I could summarize it here, but I'm not getting paid for it, so what's the point?  You can read DeLong, Ezra Klein, etc., etc.  Frankly, they take his argument far too seriously.  I still think Mankiw's blog should have the banner headline, "I'M BLOGGING AWAY MY CHILDREN'S INHERITANCE."
  • The man still needs a course in basic taxation.  Can I recommend this one next spring, with Louis Kaplow?  You can learn about tax goodies.
  • Todd Henderson got a ton of grief for a blog post that was far more open and personal about the effect of the tax cuts than Mankiw's op-ed.  I disagree with Todd's perspective, but at least he was being honest about his personal concerns.  Mankiw should get a lot more grief for this pseudo-threat to stop making the world a better place because he will lose some small percentage of any additional income he brings in.  Mankiw admits: "Paying an extra few percent in taxes wouldn’t create a lot of hardship."  And yet he claims that percentage will dictate whether he gives a guest lecture, takes on consulting work, or writes an article.  That, my friends, is someone with a strange set of utility curves.

Posted by Matt Bodie on October 12, 2010 at 02:49 PM in Blogging, Corporate, Current Affairs, Tax | Permalink

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Comments

Great post!

Posted by: Jen Kreder | Oct 12, 2010 7:37:36 PM

Cross-posted at Dr Helen:

The situation is even worse than Mankiw's analysis shows.

He is a married man with children who faces the highest marginal income tax at an income that is more than double that of a single man with no kids.

Though holding advanced degrees earned on gummint scholarships in both Physics and Law, I decided at an early age not to marry and not to breed. The result of that decision was that I had to stop working at both those professions, as in either one I arrived at the top marginal rate of around 60% (FICA included) after working only 6 months. Of course, a huge percentage of my taxes went to support the "married with children" lifestyle choices of other people: the awful public schools, the worthless whitewashed public libraries, and the like.

So I “went Galt,” and, since I began my professional career some 42 years ago, I have taken 38 weeks unpaid vacation per year, on average, from my professional work.

Being single and childfree means, of course, that you really don't have to work much to sustain your lifestyle, as long as you forgo buying all those new cars and insurance of any kind.

Added advantages are that you have ample time to travel and even to live cheaply overseas, gaining language skills and experience your peers have to forgo throughout the 18 and more diaper-changing and teen-rebellion years. They will never have the time, for example, to find out that all of our Amerikan national parks and forests are visited primarily by elderly white men and women. From Yellowstone to Mesa Verde, you will almost never see a brown or black face!

When not working the annual 14 weeks per year (average) as a computer engineer, I employed myself gaming the system by maxing out on unemployment compensation and by fixing up my principal residences, then selling them, one after another, for profit, escaping altogether any FICA and income taxes on my labors and not even paying any capital gains taxes on a profit of up to $250,000 on the sale after a two-year period. This amounts to a tax-free income of $125,000 per year, corresponding to an annual taxable income of some $250,000 I might earn practicing law for 2500 "billable hours" at $200 gross per hour. Like Mankiw, I'm no idiot, though I did show myself to be smarter than him by avoiding marriage and breeding.

I now maintain mortgage-free homes in a popular Colorado ski resort, in Austin, and in Rio de Janeiro. As Mankiw explained, it would be stupid for me to return to earning my living practicing physics, computer science or law.

Which invites me to wonder: how many Einsteins, Gateses and Zuckerbergs are forced by the Amerikan tax code to redirect their skills at an early age to plumbing and electrical installation?

Posted by: Jimbino | Oct 12, 2010 7:52:15 PM

Hi Matt - thanks for this post. I'm no economist, and I'm no expert on tax, but this op-ed (which I also read in blog form 2 years ago) drives me absolutely nuts. I find it baffling that Mankiw primarily makes his point about increasing marginal tax rates by comparing his estate's after-tax worth with a ZERO-TAX regime, which is surely completely disconnected from any current political reality or policy choice. But even more irritating, Mankiw fails to see the issue in a broader policy context. I'm willing to assume that Mankiw's writing of articles (and, to be fair, the more socially useful work of other high earners as well) will be reduced to some degree if marginal tax rates are increased. But Mankiw blithely seems to assume that this reduction in Mankiw-authored articles is a loss to society that outweighs any social goods that might be derived from increasing tax rates on the wealthy --- goods like, oh, I don't know, raising revenue to pay for the costs of our wars, or, say, reducing somewhat the perpetuation of the savage inequalities created by the intergenerational transfer of wealth. Am I missing something, or is that op-ed truly an exercise in narcissism?

Posted by: Jessie Hill | Oct 13, 2010 1:52:40 PM

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