How about instead of taxing income, you tax money being transferred out of state/country?
Because that would discourage free trade and international investment – it would tend to be even more distorting and inefficient than an income tax. Industries would tend to be local, smaller, and less efficient. And why would people want to invest abroad knowing that their income would be taxed when it comes back to them.
The US already kind of does this. As one of the kludges to handle the resident / domical issue money left abroad is not taxed. This has led to some weird situations which non-US companies avoid.
As to taxes being evil – that is a different kettle of fish. We can debate what type of levels of taxes there should be. My principle point is that the US use of dominical instead of residence / territory is highly inefficient and distortive. If we are going to have a corporate income tax then we should have the best one out there – which means using residence / territory like the rest of the world.
Side note - I have seen studies that corporate taxes under ~15% have a low to no impact on future investments.
I am confused. You are stating that under constrained resources you are expected to act as a prudent man would, neither feeding the kid caviar to letting the kid fend for themselves in the back yard – See Prudent Man Rule – just like I am suggesting?
Of course, management is held to a higher standard because they are professionals and should act like one - with diligence, wisdom, and experience. Investors give their money to management because they want their money to grow (is a risk / return contest). If this were not the case they would just keep it under their matters.
Or maybe you are confusing maximizing profits with some stylized idea of management trying to make a quick buck in casino style?
Hmmnm – that is a interesting idea. Since environmental protection is the most important thing why stop with the shareholder’s profits? Raid the worker’s pension funds and skip paying taxes. Or maybe just shut down production? Of course this leaves the question as what is important – CO2 reduction, water quality, processing of hazardous waste. Can I dump a lot of hazadus waste into the local river if it drops my CO2 footprint to zero?
Or, here is a different idea – we as a society could pass laws on what is and is not acceptable practices to the environment.
No, the law is pretty clear. Management has a fiduciary duty to manage the companies’ assets for the owners – that is the shareholders. The sections range from SEC rulings, state fraud laws, national insider trading rules, etc. CEOs can’t (or at least shouldn’t) just give money away to people they like.
That being said, there is a huge amount of discretion when applying the law. Starbucks getting bad press in England due to laws – it makes a “voluntary” contribution as a marketing ploy.
Under your scheme, GM and Google would pay about the same amount in taxes because they have about the same amount in revenue, even though Google’s profits are much higher. Besides, I would be hard pressed to think of a example where a corporation could spend money to decrease profits? Pay out more to employees? That would be picked up in income taxes. Spend more on capital improvements? That would be on the asset side, not the income side – no effect on profits. Overpay their suppliers?
It is a requirement of international business – and in theory it must be done. Look up transfer pricing.
I will use Toyota as a good, solid concert example. Toyota Inc. designs a car, Toyota Japan builds the powertrain which it sells to Toyota USA, which builds and sells the car. The car generates $1,000. Quick – how do you divide the profit? If Toyota wants to pay Japanese corporate tax they increase the price that they sell the powertrain to the US, shifting profits to Japan. Or if they want to pay US corporate taxes they drop the price.
There are principles to guide how the profit should be shared but there are large subjective areas.
The territorial taxation remark is off point. Everybody except the US (and a few very small countries) use territorial taxation. The US uses domical for taxation which is not compatible. Congress has passed a bunch of kludges to “fix” the problem but it causes major headaches. Half of the issues that surround US multinationals are due to this. It would be much more rational if we jointed the rest of the world with residential taxation.
As for the Double Dutch and other tactics – it kind of boils down to incompatible tax law which results in exploits. Bad logic and bad programming will get you every time.
Yeah, I did the standard Slashdot thing – comment first then read the article.
As for Companies not putting scanners on right of ways – it is not a issue. They either rent space from the municipality or the put the cameras on private property that overlooks said roads. From my understanding – which is 2nd hand – this is where most of the data comes from. (And there have been cases where unauthorized cameras have been found attached to bridges where the owners have not been forthcoming.)
They don’t drive into parking lots – they put up cameras along freeways, bridges, and other high traffic areas. It can’t tell where you are parked but it can tell what neighborhood you are in.
Yes, inheritance tax is high but what makes you think a wealth tax is low? You only make ½ the argument. Here is the math. Sometimes inheritance is higher, sometimes wealth. You need to make assumptions about time horizon, return, inflation, and future tax. The longer the time horizon, the worse a wealth tax is. Generally speaking for long periods of time (25 years for a generation) wealth tax has the higher burden. I will let you figure out the cross over period yourself.
End value per unit invested (dollar), no tax: ((1 + annual return in %)^time in years) End value, inheritance tax: ((1 + return)^time))*(1-tax) End value, wealth tax: (((1+return)(1-tax))^time)
I think you are missing my point on dodging taxes and distortions. I am all for simpler taxes but that is a different argument. Hiking up (or down) the tax on salaries has a low effect on the overall level of gross income – that is if you bump up or down the tax on salary income by 5% you are not going to see much change in the hours worked by people. On the other hand, hiking up (or down) investment taxes (corporate taxes, capital gains, etc.) has a much higher impact. When REITs where given favorable tax status money flowed into real-estate. When Bush Jr. enacted QDI, investments flowed from long term capital projects into current income projects.
No, there is a strong basis for this. Empirically countries with a high tax rate have lower capital formation. Real returns (returns after inflation, taxes, and various risk factors) drive investment. Wealth taxes tend to have a higher tax drag and thus lower returns. Wealth taxes distort the economy, favoring asset light business.
See my example of France vs. Germany. France has a wealth tax so they favor projects with current income asset light projects. To oversimplify, Germany has factories and chemical plants, France has high fashion.
At least we can agree that California’s wealth tax discourages investment in property. I think that was the point you were trying to make – to discourage development in places already developed.
Let me point out 2 areas of difference between us.
First, you state that inheritance tax would force families to sell off their business. That is based on how the tax in applied (some tax districts give families years to pay the tax, or give discounted values to illiquid family business.), but let’s go with that assumption. Why would an inheritance tax, which tends to be a lighter tax burden then a wealth tax, be more destructive?
Is it because it is a lumpy tax – to be paid all at once – instead of the steady grind of the wealth tax? Can’t business owners plan ahead for this by (perhaps) buying a life insurance policy to cover the predicted taxes? I know that was standard operation procedure when the US had a high inherence tax. (I would argue that under a wealth tax there would be fewer / smaller business then under a inherence tax.)
As a point of contract I will point out Germany (no wealth tax, thriving small business Mittelstand) verses France (wealth tax, lower capital formation.) While not the sole factor, I would argue it is an important factor. Secondly, you state that property tax does not disincentives or reduce property development? (I never said prevented.) Take a look at California, Prop 13, and its urban sprawl. Here higher property tax does reduce property development and rational land use.
Tax should be fair (subjective measurement) and not distort the economy negatively. Everybody will try to avoid taxes as best they can. Wealth taxes discourage people from investing in business. Inherence and property tax tend to be less distortive because there are fewer dodges that one can do - In my opinion. If you have any information on why it is harder to dodge wealth taxes I would like to hear about them – but looking at France and other countries with wealth taxes I am skeptical.
A wealth tax is a horrible idea. It has the highest tax drag in terms for:
Long term
Capital intensive
Illiquid and risky Investments. These are the type of investments we need for long term growth and should have the lowest tax drag to encourage these types of investments. An inheritance tax would be much better if you wanted to go down this road.
Let us go back to your original post where you suggest banks be confined to a single state – which I am calling regional banks. There is a lot of history here.
Let us go back to the 80's. The farm economy did not slow – it declined. Farm income dropped by about a 1/3. Between 81 to 83 the US economy grew by 12% but in the state of Iowa it fell by 11% - not just the farm economy – the whole economy of Iowa. 30 to 40 banks were failing each year in Iowa alone. This is not a isolated example. There are 100s of examples in the last 80 years where regions suffered negative growth. Some have asset bubbles, others not.
...simple banks that just lend money have no business taking risks...
And there is the rub, the business of banks is to take risks – they do it every time they lend out money. The question is how much and what types of risks they will take on. You want banks to take on specific regional risk by tying them to a single state, that is you want to make them riskier.
As for investing in the company’s stock, my main point is that Job’s tax rate was much lower because he was paid in equity - it does not matter much if it is stock or stock options. Did Jobs expose himself to diversification risk (or more specifically as you mentioned – the lack of.)? Some - but there are ways to minimize that. I think it is unfair that the rich can use techniques like this to have a lower marginal tax rate then ordinary working employees.
Some technical points. You don’t actually have to wait for the stock to appreciate. There are other techniques that can be used. In Jobs case specifically, the board retroactively lowered the strike price of his options when Apple’s shares fell. . Also, when a CEO sells a couple of million of stock it usually has no effect on the market. Relatively speaking it is small change relative to the volume and a modest disposal of assets rarely spooks investors. Once again, case in point, look at Apple’s stock when Jobs sold his stock. Not much.
* The different meanings of "down" is what I am deducing from your statement, and it is important for the point I am making. This is because regions don't typically die and low profits/occasional losses of banks isn't typically catastrophic.
It not about a slow economy – it is about the regional economy. For example, in the 1980s the overall economy was doing but in the Midwest the farm economy was collapsing from a bubble in land prices. Failing farms took down the local implement dealers, restaurants, etc. Banks were failing left and right. Since banking was (mostly) limited to the state where the bank was located, stronger outside banks could not step in. With large losses on the books the banks just stopped lending – they did not even have the capital to lend to parts of the economy that was not tied to farming. I can point to Texas with oil, Pennsylvania with steel, etc.
Bigger banks are more diversified and act more like you are suggesting.
To correct a point, “traditional” (i.e.regional banks who core business is savings, lending, and money management) banks are still bared from dabbling in stocks – that is stocks can not be used as capital for the loan portion of the business. As for derivatives (options, futures, etc.) I am all for them. They can help banks manage their duration risk – which is a bank's biggest risk. I will point to the S&L crisis where banks had lent out money at 6% but had to to pay 15% to their depositors. Since the introduction interest rate derivatives few banks have fallen do to duration. Of course it is a different thing if the banks engage in derivatives for speculative profit making instead of hedging risk.
I like Credit Unions – used to work for one. But they do have limitations. They tend to be conservative – in my mind much too so. They don’t embrace new technologies, tend not to give loans to people with marginal credit, etc. And they don’t do businesses (mostly – there are a few exceptions out there.) which is where the real money is.
Oddly enough no – it would lead to more damage. Regional banks are tied to a single region. When the region goes down it takes the banks down with them. No new loans for healthy borrowers to buy cars, houses, or businesses. I can point to dozens of examples from 1900 to the 1980s where this happens. I can’t point to any example like that after banks could expand into other states in the 1990s.
No. His salary was only $1 – which by the way has one of the highest tax rates. His compensation was in the 100s of millions, mostly via stock options which has one of the lowest tax rates. What I want to know is why I can’t be paid in low tax stock options?
Fair enough. A intelligent man knows that ½ of what he is told is false, a wise man knows which half. I trust the Economist but I recognize that is a bias. Always good to check out the primary source data and evaluate it for yourself.
My condolences on your sister. Special Ed is one of those fields where it is hard to retain high quality teachers.
As for the NCTQ, I think you criticism are slightly off point. There are 2 separate issues here. The first is the objective fact that most teachers are drawn from the bottom half of their class. If you don’t like NCTQ I can find other sources. That is a input – not a result. Your point is that some colleges don’t want to be evaluated is a different question - and is a different bucket of data.
While you might not find it fair to treat nonparticipating colleges with a zero, the report does break out those colleges so you can do your own analyst.
Let’s see – you sister graduated at the top of her class and was a teacher? What is she doing now? And why are extrapolating from a single data point? That could be dangerous. But since you wanted evidence.
The countries where pupils do best, such as Singapore, Finland and South Korea, draw all their teachers from the top third of the academic pool. In America three-quarters of teacher-training colleges accept students who graduate in the bottom half of their class.
By the way, I have a pretty good idea what Special Ed teachers do, and I greatly appreciate what they do, but of the 40 or so that I have meet none of them graduated from the top of their class or from top schools. That’s my antidotal evidence.
You don’t want to ask if the pay you are offering is sufficient for a middle class lifestyle, the question you want to ask is if the pay is drawing candidates that meet your qualifications.
High quality teachers can often make more in the private sector. Teachers tend to be drawn from the bottom half of the college graduates. This tells me something. Also, most teaching positions offer high benefits, such as generous pensions, tenure, and salary advances, which tend to be back loaded - which tend to draw in the risk adverse.
You are asking the wrong question. The question you want to ask is: For each dollar spent, what has the higher marginal effect, 1. Hiring a few high quality teachers or 2. Hiring more low quality teachers. (Or you can ask the question in reverse.).
You want to ask the question at the margin because if you do a regressive approach either way you are going to get nonsensical results – either 1 highly qualified teacher for a entire school or a school staffed with a bunch of minimum wage teacher’s aids.
From the studies that I have read on the US adding more teachers (i.e. reducing class size) does not have much impact – it is the quality that we should be forcing on – so I am with the OP on this.
Slashdot Mirror
How about instead of taxing income, you tax money being transferred out of state/country?
Because that would discourage free trade and international investment – it would tend to be even more distorting and inefficient than an income tax. Industries would tend to be local, smaller, and less efficient. And why would people want to invest abroad knowing that their income would be taxed when it comes back to them.
The US already kind of does this. As one of the kludges to handle the resident / domical issue money left abroad is not taxed. This has led to some weird situations which non-US companies avoid.
As to taxes being evil – that is a different kettle of fish. We can debate what type of levels of taxes there should be. My principle point is that the US use of dominical instead of residence / territory is highly inefficient and distortive. If we are going to have a corporate income tax then we should have the best one out there – which means using residence / territory like the rest of the world.
Side note - I have seen studies that corporate taxes under ~15% have a low to no impact on future investments.
I am confused. You are stating that under constrained resources you are expected to act as a prudent man would, neither feeding the kid caviar to letting the kid fend for themselves in the back yard – See Prudent Man Rule – just like I am suggesting?
Of course, management is held to a higher standard because they are professionals and should act like one - with diligence, wisdom, and experience. Investors give their money to management because they want their money to grow (is a risk / return contest). If this were not the case they would just keep it under their matters.
Or maybe you are confusing maximizing profits with some stylized idea of management trying to make a quick buck in casino style?
When would “taking care” not mean “maximizing return”? And I would like the answer in a total return context – that is on a risk adjusted basis.
Hmmnm – that is a interesting idea. Since environmental protection is the most important thing why stop with the shareholder’s profits? Raid the worker’s pension funds and skip paying taxes. Or maybe just shut down production? Of course this leaves the question as what is important – CO2 reduction, water quality, processing of hazardous waste. Can I dump a lot of hazadus waste into the local river if it drops my CO2 footprint to zero?
Or, here is a different idea – we as a society could pass laws on what is and is not acceptable practices to the environment.
No, the law is pretty clear. Management has a fiduciary duty to manage the companies’ assets for the owners – that is the shareholders. The sections range from SEC rulings, state fraud laws, national insider trading rules, etc. CEOs can’t (or at least shouldn’t) just give money away to people they like.
That being said, there is a huge amount of discretion when applying the law. Starbucks getting bad press in England due to laws – it makes a “voluntary” contribution as a marketing ploy.
That is not how it works.
Under your scheme, GM and Google would pay about the same amount in taxes because they have about the same amount in revenue, even though Google’s profits are much higher. Besides, I would be hard pressed to think of a example where a corporation could spend money to decrease profits? Pay out more to employees? That would be picked up in income taxes. Spend more on capital improvements? That would be on the asset side, not the income side – no effect on profits. Overpay their suppliers?
It is a requirement of international business – and in theory it must be done. Look up transfer pricing.
I will use Toyota as a good, solid concert example. Toyota Inc. designs a car, Toyota Japan builds the powertrain which it sells to Toyota USA, which builds and sells the car. The car generates $1,000. Quick – how do you divide the profit? If Toyota wants to pay Japanese corporate tax they increase the price that they sell the powertrain to the US, shifting profits to Japan. Or if they want to pay US corporate taxes they drop the price.
There are principles to guide how the profit should be shared but there are large subjective areas.
The territorial taxation remark is off point. Everybody except the US (and a few very small countries) use territorial taxation. The US uses domical for taxation which is not compatible. Congress has passed a bunch of kludges to “fix” the problem but it causes major headaches. Half of the issues that surround US multinationals are due to this. It would be much more rational if we jointed the rest of the world with residential taxation.
As for the Double Dutch and other tactics – it kind of boils down to incompatible tax law which results in exploits. Bad logic and bad programming will get you every time.
Yeah, I did the standard Slashdot thing – comment first then read the article.
As for Companies not putting scanners on right of ways – it is not a issue. They either rent space from the municipality or the put the cameras on private property that overlooks said roads. From my understanding – which is 2nd hand – this is where most of the data comes from. (And there have been cases where unauthorized cameras have been found attached to bridges where the owners have not been forthcoming.)
They don’t drive into parking lots – they put up cameras along freeways, bridges, and other high traffic areas. It can’t tell where you are parked but it can tell what neighborhood you are in.
Yes, inheritance tax is high but what makes you think a wealth tax is low? You only make ½ the argument. Here is the math. Sometimes inheritance is higher, sometimes wealth. You need to make assumptions about time horizon, return, inflation, and future tax. The longer the time horizon, the worse a wealth tax is. Generally speaking for long periods of time (25 years for a generation) wealth tax has the higher burden. I will let you figure out the cross over period yourself.
End value per unit invested (dollar), no tax: ((1 + annual return in %)^time in years)
End value, inheritance tax: ((1 + return)^time))*(1-tax)
End value, wealth tax: (((1+return)(1-tax))^time)
I think you are missing my point on dodging taxes and distortions. I am all for simpler taxes but that is a different argument. Hiking up (or down) the tax on salaries has a low effect on the overall level of gross income – that is if you bump up or down the tax on salary income by 5% you are not going to see much change in the hours worked by people. On the other hand, hiking up (or down) investment taxes (corporate taxes, capital gains, etc.) has a much higher impact. When REITs where given favorable tax status money flowed into real-estate. When Bush Jr. enacted QDI, investments flowed from long term capital projects into current income projects.
No, there is a strong basis for this. Empirically countries with a high tax rate have lower capital formation. Real returns (returns after inflation, taxes, and various risk factors) drive investment. Wealth taxes tend to have a higher tax drag and thus lower returns. Wealth taxes distort the economy, favoring asset light business.
See my example of France vs. Germany. France has a wealth tax so they favor projects with current income asset light projects. To oversimplify, Germany has factories and chemical plants, France has high fashion.
At least we can agree that California’s wealth tax discourages investment in property. I think that was the point you were trying to make – to discourage development in places already developed.
Let me point out 2 areas of difference between us.
First, you state that inheritance tax would force families to sell off their business. That is based on how the tax in applied (some tax districts give families years to pay the tax, or give discounted values to illiquid family business.), but let’s go with that assumption. Why would an inheritance tax, which tends to be a lighter tax burden then a wealth tax, be more destructive?
Is it because it is a lumpy tax – to be paid all at once – instead of the steady grind of the wealth tax? Can’t business owners plan ahead for this by (perhaps) buying a life insurance policy to cover the predicted taxes? I know that was standard operation procedure when the US had a high inherence tax. (I would argue that under a wealth tax there would be fewer / smaller business then under a inherence tax.)
As a point of contract I will point out Germany (no wealth tax, thriving small business Mittelstand) verses France (wealth tax, lower capital formation.) While not the sole factor, I would argue it is an important factor.
Secondly, you state that property tax does not disincentives or reduce property development? (I never said prevented.) Take a look at California, Prop 13, and its urban sprawl. Here higher property tax does reduce property development and rational land use.
Tax should be fair (subjective measurement) and not distort the economy negatively. Everybody will try to avoid taxes as best they can. Wealth taxes discourage people from investing in business. Inherence and property tax tend to be less distortive because there are fewer dodges that one can do - In my opinion. If you have any information on why it is harder to dodge wealth taxes I would like to hear about them – but looking at France and other countries with wealth taxes I am skeptical.
A wealth tax is a horrible idea. It has the highest tax drag in terms for:
Long term
Capital intensive
Illiquid and risky
Investments. These are the type of investments we need for long term growth and should have the lowest tax drag to encourage these types of investments. An inheritance tax would be much better if you wanted to go down this road.
Let us go back to your original post where you suggest banks be confined to a single state – which I am calling regional banks. There is a lot of history here.
Let us go back to the 80's. The farm economy did not slow – it declined. Farm income dropped by about a 1/3. Between 81 to 83 the US economy grew by 12% but in the state of Iowa it fell by 11% - not just the farm economy – the whole economy of Iowa. 30 to 40 banks were failing each year in Iowa alone. This is not a isolated example. There are 100s of examples in the last 80 years where regions suffered negative growth. Some have asset bubbles, others not.
...simple banks that just lend money have no business taking risks...
And there is the rub, the business of banks is to take risks – they do it every time they lend out money. The question is how much and what types of risks they will take on. You want banks to take on specific regional risk by tying them to a single state, that is you want to make them riskier.
As for investing in the company’s stock, my main point is that Job’s tax rate was much lower because he was paid in equity - it does not matter much if it is stock or stock options. Did Jobs expose himself to diversification risk (or more specifically as you mentioned – the lack of.)? Some - but there are ways to minimize that. I think it is unfair that the rich can use techniques like this to have a lower marginal tax rate then ordinary working employees.
Some technical points. You don’t actually have to wait for the stock to appreciate. There are other techniques that can be used. In Jobs case specifically, the board retroactively lowered the strike price of his options when Apple’s shares fell. . Also, when a CEO sells a couple of million of stock it usually has no effect on the market. Relatively speaking it is small change relative to the volume and a modest disposal of assets rarely spooks investors. Once again, case in point, look at Apple’s stock when Jobs sold his stock. Not much.
* The different meanings of "down" is what I am deducing from your statement, and it is important for the point I am making. This is because regions don't typically die and low profits/occasional losses of banks isn't typically catastrophic.
It not about a slow economy – it is about the regional economy. For example, in the 1980s the overall economy was doing but in the Midwest the farm economy was collapsing from a bubble in land prices. Failing farms took down the local implement dealers, restaurants, etc. Banks were failing left and right. Since banking was (mostly) limited to the state where the bank was located, stronger outside banks could not step in. With large losses on the books the banks just stopped lending – they did not even have the capital to lend to parts of the economy that was not tied to farming. I can point to Texas with oil, Pennsylvania with steel, etc.
Bigger banks are more diversified and act more like you are suggesting.
To correct a point, “traditional” (i.e.regional banks who core business is savings, lending, and money management) banks are still bared from dabbling in stocks – that is stocks can not be used as capital for the loan portion of the business. As for derivatives (options, futures, etc.) I am all for them. They can help banks manage their duration risk – which is a bank's biggest risk. I will point to the S&L crisis where banks had lent out money at 6% but had to to pay 15% to their depositors. Since the introduction interest rate derivatives few banks have fallen do to duration. Of course it is a different thing if the banks engage in derivatives for speculative profit making instead of hedging risk.
I like Credit Unions – used to work for one. But they do have limitations. They tend to be conservative – in my mind much too so. They don’t embrace new technologies, tend not to give loans to people with marginal credit, etc. And they don’t do businesses (mostly – there are a few exceptions out there.) which is where the real money is.
Oddly enough no – it would lead to more damage. Regional banks are tied to a single region. When the region goes down it takes the banks down with them. No new loans for healthy borrowers to buy cars, houses, or businesses. I can point to dozens of examples from 1900 to the 1980s where this happens. I can’t point to any example like that after banks could expand into other states in the 1990s.
No. His salary was only $1 – which by the way has one of the highest tax rates. His compensation was in the 100s of millions, mostly via stock options which has one of the lowest tax rates. What I want to know is why I can’t be paid in low tax stock options?
Eh – the words are reasonably close. Personally, I always get cosmetology and cosmology mixed up.
Fair enough. A intelligent man knows that ½ of what he is told is false, a wise man knows which half. I trust the Economist but I recognize that is a bias. Always good to check out the primary source data and evaluate it for yourself.
My condolences on your sister. Special Ed is one of those fields where it is hard to retain high quality teachers.
As for the NCTQ, I think you criticism are slightly off point. There are 2 separate issues here. The first is the objective fact that most teachers are drawn from the bottom half of their class. If you don’t like NCTQ I can find other sources. That is a input – not a result. Your point is that some colleges don’t want to be evaluated is a different question - and is a different bucket of data.
While you might not find it fair to treat nonparticipating colleges with a zero, the report does break out those colleges so you can do your own analyst.
Let’s see – you sister graduated at the top of her class and was a teacher? What is she doing now? And why are extrapolating from a single data point? That could be dangerous. But since you wanted evidence.
The countries where pupils do best, such as Singapore, Finland and South Korea, draw all their teachers from the top third of the academic pool. In America three-quarters of teacher-training colleges accept students who graduate in the bottom half of their class.
http://www.economist.com/news/...
By the way, I have a pretty good idea what Special Ed teachers do, and I greatly appreciate what they do, but of the 40 or so that I have meet none of them graduated from the top of their class or from top schools. That’s my antidotal evidence.
You don’t want to ask if the pay you are offering is sufficient for a middle class lifestyle, the question you want to ask is if the pay is drawing candidates that meet your qualifications.
High quality teachers can often make more in the private sector. Teachers tend to be drawn from the bottom half of the college graduates. This tells me something. Also, most teaching positions offer high benefits, such as generous pensions, tenure, and salary advances, which tend to be back loaded - which tend to draw in the risk adverse.
You are asking the wrong question. The question you want to ask is: For each dollar spent, what has the higher marginal effect, 1. Hiring a few high quality teachers or 2. Hiring more low quality teachers. (Or you can ask the question in reverse.).
You want to ask the question at the margin because if you do a regressive approach either way you are going to get nonsensical results – either 1 highly qualified teacher for a entire school or a school staffed with a bunch of minimum wage teacher’s aids.
From the studies that I have read on the US adding more teachers (i.e. reducing class size) does not have much impact – it is the quality that we should be forcing on – so I am with the OP on this.