Obama shifts stance on dividend taxes

Alex Brill and Alan Viard write:

In the summer of 2008, the Obama campaign's two top economists proudly proclaimed that their candidate favored a dividend tax rate of 20 percent, "lower than all but five of the last 92 years." Well, that was then. In a sharp break from that campaign stance and the Administration's first three budgets, President Obama is now calling for an all-in dividend tax rate of almost 45 percent, the highest rate in 27 years. The president's about-face bodes ill for the economy.

While the president's proposal raises dividend tax rates only on high-income stockholders, Americans at all income levels will feel the economic impact of the tax hike. Higher dividend taxation will impede the investment that fuels long-run growth, depress stock prices, and weaken incentives for good corporate governance.

The president's proposal would allow the 2003 dividend tax cut to expire for high-income households at the end of the year, pushing the top dividend tax rate up from 15 to 39.6 percent. That's a dramatic increase in its own right. But, other provisions make the true increase even larger. The president also wants to bring back a provision phasing out deductions for high-income taxpayers, which will cause each additional dollar of dividends to trigger 1.2 cents of extra taxes. And, beginning next year, the president's health care law will impose an additional 3.8 percent tax on dividends and other investment income of high-income households. Under the president's proposal, the top all-in dividend tax rate will be 44.6 percent - almost triple today's 15 percent rate.

An Award for Economics Educators

The publisher of my favorite textbook is sponsoring an award for economics educators.  If you have a classroom technique that is particularly noteworthy, you might win several thousand dollars and a trip to a teaching conference in Orlando.  Click here for information.

What do Larry Summers, Doug Elmendorf, and Greg Mankiw have in common?

Only one of us won a John Bates Clark Medal.
Only one of us is Director of the Congressional Budget Office.
Only one of us wrote a best-selling textbook.

But all three of us were ec 10 section leaders early in our careers.

Being an ec 10 section leader is one of the best teaching jobs at Harvard. You can revisit the principles of economics, mentor some of the world’s best undergraduates, and hone your speaking skills. In your section, you might even have the next Andrei Shleifer or Ben Bernanke (two well-known ec 10 alums). And believe it or not, we even pay you for this!

If you are a graduate student at Harvard or another Boston-area university and have a strong background in economics, I hope you will consider becoming a section leader in ec 10 next year.  Applications are encouraged from PhD students, law students, and master's students in business and public policy.

If you think you might be interested, please come to one of the information sessions we are holding.

Tuesday (tonight) at 6:30 pm in the Littauer 3rd floor lounge.
Wednesday (tomorrow) at 6:30 pm at KSG Taubman 275.

What is Chu-Mankiw convergence?

Answer in the Washington Post.  (Hint: Chu and Mankiw both rhyme with Pigou.)

Taxing Carried Interest

Click here to read my column in Sunday's NY Times.  The piece is an attempt to explain the taxation of carried interest and is more pedagogical than opinionated.  For the truly wonky who want to learn more about this topic, I recommend this article by Alan Viard.

Rogoff reflects on Jeremy Lin

Ken writes:

What amazes me is the public’s blasé acceptance of the salaries of sports stars, compared to its low regard for superstars in business and finance. Half of all NBA players’ annual salaries exceed $2 million, more than five times the threshold for the top 1% of household incomes in the United States. Because long-time superstars like Kobe Bryant earn upwards of $25 million a year, the average annual NBA salary is more than $5 million. Indeed, Lin’s salary, at $800,000, is the NBA’s “minimum wage” for a second-season player. Presumably, Lin will soon be earning much more, and fans will applaud.

Yet many of these same fans would almost surely argue that CEOs of Fortune 500 companies, whose median compensation is around $10 million, are ridiculously overpaid. If a star basketball player reacts a split-second faster than his competitors, no one has a problem with his earning more for every game than five factory workers do in a year. But if, say, a financial trader or a corporate executive is paid a fortune for being a shade faster than competitors, the public suspects that he or she is undeserving or, worse, a thief.

In case you are curious: Yes, Jeremy Lin did take ec 10.

Jeff Sachs submits a job application

via the Washington Post.