SCHADENFREUDE IN BOSTON.

I happened across the lamentations in Boston's Globe about taxing college endowments and all the rest because that headline caught my eye at a news-stand in North Station.

Howie Carr has to live in the Kultursmog all the time.  And he's not playing nice.

Here’s how you know that there’s at least one beautiful new provision in the Republicans’ tax bill: Harvard is screaming bloody murder, ditto Yale, Wellesley, Smith and all the rest of the pampered-puke rich-kid private colleges.

The GOP must be doing something right!

He gets to be the provocateur. I'm simply an observer passing through. But we're having similar thoughts.

Hilariously, the same eggheads who are always denouncing the Republicans as the party of “the rich” are now sounding like ... Republicans, defending their vast billion-dollar tax breaks.

Here’s the statement from the shocked, shocked president of Harvard, Drew Faust: “A tax on university endowments is really a tax on the people who make up these institutions and the work they do: donors, alumni, staff, students and faculty.”

Tax incidence is messy, but, yes, ultimately, all income accrues to people.

 
Then he gets to the local member of Congress.

Rep. Michael Capuano (D-Somerville) is another pablum-puking Ivy League (Dartmouth) SJW defending his alma mater: “These schools use endowments to build buildings, which employ our workers.”

Did you ever hear such supply-side nonsense? Next he’ll be telling us that the money will “trickle down” to the middle class. Capuano is spouting “voodoo economics,” to coin a phrase.

To Harvard and Dartmouth and the rest of the Beautiful People, I would make the same observation their hero Obama once did: “At some point you’ve made enough money.”

As for the Poison Ivy League’s alleged contributions to society, to quote Obama again: “You didn’t build that. Somebody else made that happen.”

Of course, the tax would only be imposed on the 60 to 100 richest, most arrogant universities in the land. But Sen. Ed Markey frets that it would establish a “dangerous precedent” and soon every college would be paying the tax on their endowments’ profits.

Funny, that exact same argument can be made about the proposed “millionaire’s tax” on the state ballot next year — that months after the greed-crazed hacks impose a graduated income tax, every taxpayer in Massachusetts will soon be paying 9 percent.

This 1.4 percent tax must be a great idea, judging by the totally unhinged reactions of The Boston Globe’s trust-funded readers this week.

He's the provocateur, I'm still the observer.

Let me offer you, dear reader, a Real Clear Markets meditation on the "trickle down" smear.

The idea of “trickle-down theory” is nonexistent, except as perpetuated by those opposed to across-the-board tax rate cuts that include the wealthy. As Dr. Thomas Sowell observes in his 2012 treatise, ‘Trickle Down Theory’ and ‘Tax Cuts for the Rich’, “No such theory has been found in even the most voluminous and learned histories of economic theories, including J.A. Schumpeter’s monumental 1,260-page History of Economic Analysis.”

No serious or prominent conservative, politician or free market thinker has espoused this “theory” either. It is the standard straw man – or, as Dr. Sowell puts it, “a classic example of arguing against a caricature instead of confronting the argument actually made.”

The “trickle-down” concept suggests two inherent fallacies that ought to be illuminated. First, it portrays a reversal of economic events, suggesting that profits will “trickle down” only after the “rich get richer.” Second, it posits that the benefits experienced by others are intended as a mere side effect of lower-tax policy; in truth, this is an instance of a rising tide lifting all boats.

Dr. Sowell essentially addresses both fallacies in his essay. He notes, “Workers must first be hired, and commitments made to pay them, before there is any output produced to sell for a profit, and independently of whether that output subsequently sells for a profit or at a loss. With many investments, whether they lead to a profit or a loss can often be determined only years later, and workers have to be paid in the meantime, rather than waiting for profits to ‘trickle down’ to them.”

“The real effect of tax rate reductions,” Dr. Sowell concludes, “is to make the future prospects of profit look more favorable, leading to more currentinvestments that generate more current economic activity and more jobs.”

The “trickle down” myth further suggests that there is a zero-sum game being played, and that by the wealthy benefiting from tax rate cuts, lower- and middle-income people necessarily lose out. As explained in the quotation above, this is a fallacy – and the real world bears it out.

Perhaps "trickle down" is a popularizers explanation of the multiplier accompanying a cut in tax rates.  Unfortunately, in the simple macroeconomic model, there's generally only one tax rate t and one marginal propensity to consume m, and the trickle down effect manifests itself in the new disposable income, and the resulting new consumption.

Taxation, though, ought not be viewed as zero-sum.  The great challenge of political economy is keeping government activities symbiotic with commerce (rules of exchange and contract) rather than becoming parasitic on commerce, or being captured by commerce.