Steph Curry and Steve’s Bike Shop

Here’s the PR statement put out by the Republicans:

The Tax Cuts and Jobs Act includes specific safeguards to prevent tax avoidance and help ensure taxpayers of all income levels play by the rules under this new fairer, simpler tax system. Our legislation will ensure this much-needed tax relief goes to the local job creators it’s designed to help by distinguishing between the individual wage income of NBA All-Star Stephen Curry and the pass-through business income of Steve’s Bike Shop.

Is it true that Steve creates jobs while Curry does not?  Not really.  In a sense both people create jobs.  Because of Steve and Steph, some cashiers have jobs at Steve’s bike shop and some concession stand people have jobs at the Golden State arena.  So certain specific jobs are created by their actions.

On the other hand, neither cause the job total in America to be higher than otherwise.  Those employed at the bike shop and basketball arena would have jobs somewhere else if not for Steve and Steph (due to monetary offset.)

The real argument for the lower pass through rate (if I understand it correctly) is that capital income should not be taxed at all, and a portion of business income is capital income.

Why is Curry the only person mentioned in the GOP document, and why in a less than favorable way?  I’m not sure.  In my view, Steph Curry is far more valuable to society than Steve (for standard diamond/water paradox reasons).  But I’d guess that many GOP voters resent the high incomes earned by African-America athletes, especially those who don’t seem grateful to America.  This is probably why Trump keeps picking a fight with the NFL—he knows it appeals to his base.  It’s all part of our stupid culture wars.

Some have argued that high wage earners often benefit from government subsidies, such as government funding of sports arenas.  That’s true, but businesses also get massive government subsidies, and only a very tiny share of Steph Curry’s income is due to these subsides; it mostly reflects his extremely high productivity (which leads to big TV ratings).  I have no problem with taxing high wage earners like Steph Curry at a 50% or 60% rate, but let’s not kid ourselves and claim that businesses are somehow more virtuous that high wage earners.  Productivity is productivity, whether from white businesses or African-American workers.  And Steph is way more productive than Steve.

PS.  It’s not good when the very first bullet point in your PR document is inaccurate:

The Tax Cuts and Jobs Act delivers tax relief at every income level – while maintaining the top 39.6% tax rate on high-income earners.

This post explains why.


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33 Responses to “Steph Curry and Steve’s Bike Shop”

  1. Gravatar of Major.Freedom Major.Freedom
    5. November 2017 at 13:34

    Donna Brazille interview – “They don’t know what it’s like to bury a child, I did, **Seth Rich**”.

    https://youtu.be/FynbE6wkMN0?t=6m35s

    Clinton Campaign is now calling Donna Brazile a Putin stooge.

    Member when the usual yokels on this blog parroted the CIA Operation Mockingbird talking points?

    Fools, all of them.

    You just wait to see what is going to come out about North Korea, and the “Big 3 families”. You yokels just sit back and watch.

  2. Gravatar of rtd rtd
    5. November 2017 at 17:49

    “Why is Curry the only person mentioned in the GOP document, and why in a less than favorable way?” I suppose for the same reason Tom Brady and Bill Gates have been mentioned in prior GOP documents? I’m guessing it’s politics – demagoguery…

  3. Gravatar of Major.Freedom Major.Freedom
    5. November 2017 at 18:15

    Paul Ryan is trying to make the tax reform TEMPORARY in the proposed bill.

    This is the swamp people

  4. Gravatar of Benjamin Cole Benjamin Cole
    5. November 2017 at 19:12

    Good post, but I wonder if we are missing the forest.

    The U.S. tax code is 75,000 pages long. http://www.businessinsider.com/2014-how-many-pages-in-the-us-tax-code-2014-4

    Of course, anyone is going to believe the tax code is rigged, if it has 75,000 pages. I do.

    The published, upfront tax rates matter? Mitt Romney’s tax returns revealed he paid 13% of income in taxes. That is what he paid, knowing that he would reveal his taxes. Payroll taxes alone are higher than that on most employees’ first $100k in income.

    Moreover, income is becoming invisible, untaxable. $32 trillion in offshore accounts and counting. Bitcoin going bananas (I won’t use the other “b” word, regards to Alfred Kahn). Cash in circulation reaching $5,000 for every resident of the US.

    If we want tax reform, maybe the published, upfront rates matter. Maybe they don’t. I suspect income tax collection has become a national farce. I have 75,000 pages of evidence.

    Probably better to switch to property taxes, sales taxes, fossil fuel taxes, Pigou taxes and tariffs. The simpler the better.

    Obviously my tax schemes are not topics of discussion. I sense the same people designing your taxes like the 75,000-page tax code.

  5. Gravatar of Jon Jon
    5. November 2017 at 20:54

    Benjamin,

    The tax code is complex because it is hard to distinguish between labor income and capital income. Furthermore once you want to tax a business, defining gross and net amounts is non-trivial. (Actually that problem applies to individuals too–taxing interest income and capital gains under high-inflation conditions!).

    It’s never going to be possible to have a simple income tax. The only simple “income” tax looks like a transaction tax–do you really want to tax every transaction? How do you enforce that if you did?

    Even a universal VAT… requires some rules about who gets to rebate the VAT and who doesn’t. How do you tell a household and a business apart?

  6. Gravatar of dtoh dtoh
    5. November 2017 at 21:23

    Scott,
    I’ll respond to the question of the fairness of taxing high wage earners in protected industries in a separate comment. For now let me make a few points points.

    1. I don’t think you should tax any income at all. Everything should be done through a progressive consumption tax.

    2. As I have said, I think the distinction between labor and capital is a false one. What is the difference between investing in getting an economics degree and investing in building a laundromat?

    3. I have a feeling you’re look at tax reform in the context of the impact it will have on the number of hours worked. I think that’s minor. I think the important issue is how it will affect the mix between consumption and investment.

  7. Gravatar of Mark Mark
    5. November 2017 at 21:28

    Scott, this post reads like someone trying to satire the Guardian. The imputations of racism from whole cloth in order to demonize Republicans even while they’re talking about *tax policy.* You’re political posts are getting a little ridiculous.

    People clearly resent athletes because they make a lot of money providing what they believe is an objectively less valuable service (most people probably don’t fully accept the subjective nature of economic value; that’s why they think an ER doctor is worth more than Lebron James). Most high profile athletes just happen to be black. Trying to tie that (or the criticism of NFL protests) to racism against black people is as asinine and disingenuous, not to mention counterproductive, as trying to attribute anti-CEO sentiment to hatred of white people or anti-banker (or anti-Hollywood) sentiment to anti-Semitism. Much as one may disagree with some of these sentiments, the reasons for them are not racial; you just seem to be grasping for ways to demonize people you don’t like for other reasons.

    And I have to believe you know better than to lump opposition to NFL protesters against purported racial injustice with plain racism or just ‘culture wars.’ Most critics, as I see it, think that the principal reason black people are disproportionately killed by police is because a disproportionate number of criminals or suspected criminals are black. A Harvard study backs up this position. Disagree with it all you want, it’s a valid contention, and disagreeing with a movement or protest against ‘racial injustice’ does not make one a racist when one is simply disputing that the phenomenon itself can be really characterized as a ‘racial injustice.’And naturally, if it isn’t really widespread police racism driving the disparity, then it’s not surprising many would be angry at the spurious attribution of racism to police officers or the country as a whole.

  8. Gravatar of dtoh dtoh
    5. November 2017 at 21:35

    @jon @benjamin cole

    A national sales tax is simple to implement. Don’t do a VAT. VATs are complicated. You can accomplish the same thing with a sales tax that just applies to consumers and not to businesses. Businesses would simply provide a tax ID at the time of purchase which would exempt them from the tax. We already have extensive rules and enforcement in place to prevent business expenditures being fraudulently used as a hidden form of compensation. Very little incremental effort would be required to apply these to a national sales tax.

    Similarly, you can implement the sales tax in a progressive manner by giving everyone a card which exempts them from the sales tax on the first $10k (for example) of purchases. After the balance on the card is depleted, they pay the full sales tax.

    Scott will argue that evasion is a big problem with a sales tax, but he’s wrong.

  9. Gravatar of dtoh dtoh
    5. November 2017 at 21:44

    Scott,
    I know I mentioned athletes in the list of rent seeking parasites, but the aggregate income of athletes is not really that great. I’m much more concerned about bankers, lawyers and college professors.

  10. Gravatar of ssumner ssumner
    5. November 2017 at 21:58

    Jon, You said:

    “It’s never going to be possible to have a simple income tax.”

    Why do other countries have far simpler income taxes?

    Mark, A couple years ago I would have agreed with you. But I’ve recently seen far too many disturbing trends in this country, and I can’t accept that sort of excuse any longer. One has to be willfully blind not to see the sharp rise in racism, on the internet and all through our society.

    Did you see that a baseball player was recently given a standing ovation for engaging in crude racism?

    This has nothing to do with the question of whether the protests are making a valid point.

    dtoh, As I’ve said many times, any tax expert will tell you that you are wrong about VATs. There is no country in the world that raises the sort of revenue from VAT that you envision. It’s impossible. I’d guess 10% of GDP is roughly the maximum from a VAT, and government spending in America is 35% of GDP.

  11. Gravatar of ssumner ssumner
    5. November 2017 at 22:01

    dtoh, College professors aren’t impacted by higher taxes on the above $260,000 class. Probably less than 1% of professors make that much, maybe 5% if you include family income.

    There are 100 times as many parasites in the business community–starting with agriculture, and then moving on to car dealerships, realtors, etc.

  12. Gravatar of Jon Jon
    5. November 2017 at 22:49

    Scott,

    Maybe we need to define “simple” and “far simpler”. What I mean is that you can cannot fit the tax code in one page unless you do something like a transaction tax with voluntary reporting. In your, “other countries have far simpler” how long is their tax code? How long according to you still qualifies as “short”.

    The Sherman anti-trust act was two paragraphs — really two sentences; that is short. One page is short. How short constitutes short?

  13. Gravatar of Benjamin Cole Benjamin Cole
    6. November 2017 at 03:31

    dtoh, jon and Scott:

    Yes, any tax can be avoided. But jeez, income taxes are too complicated and beg to be avoided.

    Yes, maybe a national sales tax can only raise 10% of GDP, probably less. But add on a national property tax, heavy fossil fuels taxes, Pigou taxes, and tariffs.

    Unfortunately, we probably have to keep the payroll taxes, about a trillion dollars a year worth (although maybe this can be funded by QE. Have the Fed buy Treasuries and place them into the SS trust funds).

    Or we can have a 75,000-page income tax code, and offshore bank accounts with $32+ trillion, and $5,000 in cash in circulation for every resident, and Bitcoin.

    And make-believe tax rates. The Gong Show looks serious compared to our taxes.

    As Sumner has pointed out, who cares how much income someone has if they do not spend it?

    The demand on resources comes from spending.

  14. Gravatar of dtoh dtoh
    6. November 2017 at 03:45

    Scott,
    I’ve responded to these argument of yours in great detail before (https://www.themoneyillusion.com/?p=28842) but whenever I explain in detail why you’re wrong, you stop responding.

    In short the reasons a sales tax/vat would be effective in terms or raising the required revenue in the U.S.

    1. Your 35% of GDP is just dead wrong. You just need to raise the equivalent of current US federal tax revenue less social security receipts…. that’s more like 18% of GDP.

    2. U.S. PCE as a percent of GDP is substantially higher in the U.S. than in other countries where VAT has been implemented so you’ve got a bigger numerator to start with.

    3. Receipts as a percent of PCE are low in part in other countries because they exempt, food, etc. Using a flat dollar deduction instead would substantially increase revenue as a percent of PCE compared to those other countries using VATs.

    4. The evasion rates you have cited before are OECD averages. Countries like the UK with decent enforcement have low evasion rate. If you eliminate carousel schemes (which would not exist under a US sales tax regime) evasion rates are very low for VAT countries with good enforcement.

    5. The US has even better enforcement, tighter borders, better tracking of cash, high concentrations of retail in large tax compliant retailers, etc. so it would see even higher compliance rates.

    The numbers are spelled out in detail in the link above. They’re irrefutable, which is why I suspect I won’t get a response to this comment.

  15. Gravatar of Massimo Heitor Massimo Heitor
    6. November 2017 at 08:53

    Stephen Curry got into a public feud with Trump and supported the Kaepernick anti-US, anti-cop protest movement. And he’s the highest paid NBA player, which all justify mentioning him by name. If this were racism, Trump wouldn’t have previously invited Curry to be honored at the White House nor would Trump have been so willing to engage critics of all ethnic groups.

    Trump took the side of the US flag and police officers. More than just a narrow Trump fan base, the majority of America feel that way. Trump has also been playing a surprise defense in a mostly one sided culture war.

    I agree with Sumner’s dry tax policy.

  16. Gravatar of Cory Cory
    6. November 2017 at 08:58

    Good points by a lot of folks. What I would add is that I think even if we could achieve a true consumption tax regime we would still have the problem of people disguising personal consumption as business consumption.

  17. Gravatar of TravisV TravisV
    6. November 2017 at 11:14

    A new essay by Will Wilkinson that’s an excellent read:

    https://niskanencenter.org/blog/libertarian-democracy-skepticism-infected-american-right/

  18. Gravatar of Matthew Waters Matthew Waters
    6. November 2017 at 11:57

    Uh, I don’t think much of a map has to be drawn as to why Steph Curry was used and not, say, Tom Brady.

  19. Gravatar of dtoh dtoh
    6. November 2017 at 13:43

    @cory

    You said, “we would still have the problem of people disguising personal consumption as business consumption.”

    Why would it be more of a problem than it is now. With personal income tax rates at 40% now, there would be much less incentive to cheat under a regime where consumption tax rates were 20% and there was no income tax.

  20. Gravatar of Scott Sumner Scott Sumner
    7. November 2017 at 08:03

    dtoh, You said:

    “Your 35% of GDP is just dead wrong. You just need to raise the equivalent of current US federal tax revenue less social security receipts…. that’s more like 18% of GDP.”

    What about state and local taxes? I thought you also wanted to get rid of state income taxes. Have you changed your mind on that? Or do you plan to have both a high VAT and really high state sales taxes?

    You said:

    “U.S. PCE as a percent of GDP is substantially higher in the U.S. than in other countries where VAT has been implemented so you’ve got a bigger numerator to start with.”

    The difference is not that large.

    You said:

    Receipts as a percent of PCE are low in part in other countries because they exempt, food, etc.”

    There’s no way it would cover everything in the US at the full rate. And if it did, it would balloon spending even more, as government spending on health care, education, apartment rent, etc, would rise sharply. Trust me, this won’t work. If it did other countries would have tried it.

    Jon, In some countries like Sweden you don’t even have to do your taxes, the government just sends you the bill.

    Massimo, You said:

    “Trump took the side of the US flag and police officers.”

    Yes, Trump is such a patriot. That’s why he evaded the draft and then mocked McCain for being captured in Vietnam. I wish I could be so patriotic. Must be nice.

    Are you also on the side of police officers who shoot unarmed black men? Let me guess.

    Cory, The solution is simple—tax business consumption. Why are business lunches deductible?

  21. Gravatar of dtoh dtoh
    7. November 2017 at 08:52

    Scott –

    1. What about state and local taxes?
    Leave it up to the States. Property taxes. Income taxes. Sales tax… however each state wants to do it. (But if I were running state/local governments, I would have a very progressive fixed asset tax on property, boats, aircraft, expensive cars, etc.)

    2. The difference is not that large.
    Yes it is that large. As a percent, 21% higher in France and Germany than the U.S.

    3. Trust me, this won’t work. If it did other countries would have tried it.
    That’s the most illogical argument you’ve ever made. With that line of reasoning, we’d still be living in caves. How would you respond to the argument that NGDP targeting won’t work. If it did we would have already tried it.

  22. Gravatar of dtoh dtoh
    7. November 2017 at 08:53

    Scott, Typo 21% higher in the U.S.

  23. Gravatar of Massimo Heitor Massimo Heitor
    7. November 2017 at 13:02

    @sumner,

    “Yes, Trump is such a patriot. That’s why he evaded the draft and then mocked McCain for being captured in Vietnam.”

    McCain is the traitor: http://www.unz.com/article/mccain-and-the-pow-cover-up/

    That is written by Sydney Schanberg, Pulitzer Prize winning journalist, who lived in Cambodia and provided long-term, first-hand coverage of conflicts in that area pretty deeply.

    And Trump is very genuinely a patriot.

  24. Gravatar of Jim Glass Jim Glass
    7. November 2017 at 14:41

    Larry Summers, interviewed by Tyler, in case not reported here before….

    “Right now, I have an instinct towards nominal GDP targeting”

    His instincts seem to be gradually coming around.

    Also on the Fed consistently undershooting its 2% inflation target, corporate tax cuts, a whole bunch of other things.

    https://medium.com/conversations-with-tyler/tyler-cowen-larry-summers-blog-secular-stagnation-twitter-421a69ed84c8

  25. Gravatar of Jon Jon
    7. November 2017 at 21:40

    Scott,

    Yes, the IRS gathers lots of data and then waits to see if you submit the same data. Sweden sends you the forms with the data that they have. That is great for most people; we have 1040-EZ. Nonetheless, I am close to several Swedes– they assure me, “everything that happens in Sweden has something to do with avoiding tax”. Their own activities often blurring the spirit of the law with respect to what is a business and personal expense. They assure me this requires hiring an accountant.

  26. Gravatar of Mark Mark
    8. November 2017 at 00:46

    Scott,

    “Mark, A couple years ago I would have agreed with you. But I’ve recently seen far too many disturbing trends in this country, and I can’t accept that sort of excuse any longer. One has to be willfully blind not to see the sharp rise in racism, on the internet and all through our society.”
    Were you not on the internet much prior to 2016? And in any case, it’s entirely beside the point. Did the uptick in the pervasiveness of communism justify McCarthyism? Even if racism is as ubiquitous as so many say it is, that does nothing to make your imputation of racist motivations onto lawmakers less frivolous. Is any mentioning of a black individual in any negative context now sufficient evidence of racism?

    “This has nothing to do with the question of whether the protests are making a valid point.”
    Why not? You equate vigorous opposition to the protests to racism; whether valid reasons other than racism exist for such opposition is the point.

    “Did you see that a baseball player was recently given a standing ovation for engaging in crude racism?”
    No, I don’t follow sports in any capacity. What were the specifics? Not that I don’t fully trust your assessment of what constitutes crude racism, but I don’t.

  27. Gravatar of Mark Mark
    8. November 2017 at 00:51

    “Are you also on the side of police officers who shoot unarmed black men? Let me guess.”

    As opposed to unarmed people of other ethnicities? Are you familiar with this study, Scott?
    http://www.nber.org/papers/w22399

    I don’t think it helps discussions of this matter that so many people accept it as a foregone conclusion that (as with so many other issues) the observed disparity necessarily follows from discrimination.

    A great way to lessen racial tension is to not take issues that are not principally about race and make them principally about race.

  28. Gravatar of ssumner ssumner
    8. November 2017 at 08:32

    Massimo, So, also a conspiracy nut. Why am I not surprised?

    Mark, Check out this article:

    https://sports.yahoo.com/yuli-gurriel-gets-rousing-ovation-houston-crowd-controversial-suspension-022141122.html

    I’m not blind to what’s going on in this country. Look at how Gilmore conducted himself during the recent campaign in Virginia. He would not have done that before Trump.

    dtoh, OK, under your system we’d have to still collect receipts and go through all the hassles of doing state and local income taxes. No thanks.

    I don’t trust the 21% figure, but don’t have time to double check it. Maybe stuff called C in the US is called G in France. But the underlying consumption is not that different in the two countries.

    Thanks Jim.

    Jon, Maybe, but based on what I’ve read doing income taxes is dramatically easier in other countries.

    Mark, Check out this article:

    https://sports.yahoo.com/yuli-gurriel-gets-rousing-ovation-houston-crowd-controversial-suspension-022141122.html

    I’m not blind to what’s going on in this country. Look at how Gillespie conducted himself during the recent campaign in Virginia. He would not have done that before Trump.

  29. Gravatar of Mark Mark
    8. November 2017 at 12:20

    1) Gillespie isn’t the one who wrote the Republicans’ PR statement. And as I understand it, context of the election battle was quite offensive and brutal in general (the LVF ad against Gillespie coming to mind) and Gillespie lost by 20 points. This particularly doesn’t strike me as evidence of resurgent racism.

    2) The affair seems more farce than tragedy to me. For starters, the guy is Cuban, so I doubt he’s signalling white supremacy; it was a juvenile racist joke, and don’t doubt that he earned his suspension. And it seems to me the Houston crowd was supporting their home team, at the expense of the opposing team, unconditionally. It’s dumb, no argument here. But it’s nothing new. In fact, sport fan behavior has been far worse at most points in our past. Players have brutall assaulted members of opposing teams with the enthusiastic support of their audiences. This incident still looks like more of a molehill than a mountain to me.

    To paraphrase Timothy Mason, “if hating is part of our task, it is necessary that we hate precisely.”

  30. Gravatar of Mark Mark
    9. November 2017 at 02:38

    *typo: meant to say Gillespie lost by 10 not 20 points (9 point to be precise.)

  31. Gravatar of ssumner ssumner
    10. November 2017 at 12:23

    Mark, You said:

    “It’s dumb, no argument here. But it’s nothing new.” Sure, I’m old enough to recall Jim Crow.

    But I do think that Trump has made racism more “cool” than 10 years ago. Having said that, I’m also on record claiming that the campus left is partly to blame, as PC excesses push people right into Trump’s arms. If SJWs keep claiming that white men are evil, eventually they’ll embrace the role.

  32. Gravatar of dtoh dtoh
    10. November 2017 at 23:38

    Scott

    “OK, under your system we’d have to still collect receipts and go through all the hassles of doing state and local income taxes. No thanks.

    I don’t trust the 21% figure, but don’t have time to double check it. Maybe stuff called C in the US is called G in France. But the underlying consumption is not that different in the two countries.”

    If you don’t like the hassle, move some place else. State and local governments will figure this out quickly and move to sales and/or property or perhaps shift to a simpler income tax based on on social security withholding.

    PCE as a percentage of GDP is 56% in France and Germany versus 68% in the US.

  33. Gravatar of ssumner ssumner
    15. November 2017 at 08:32

    dtoh, You said:

    “simpler income tax based on on social security withholding.”

    That’s what I’m calling for.

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