Tuesday, May 6, 2008

Simplistic Simplifications

Greg Mankiw, commenting on international tax competition, writes:

This issue goes well beyond economics to questions of political economy and political philosophy. If you think it is the job of government to take from Peter to pay Paul, and if Peter can move around the globe, then you need international tax cooperation. Otherwise, some countries will become nations of Peters, leaving all the Pauls to fend for themselves. On the other hand, if you think that the main job of government is to facilitate voluntary exchange by protecting property rights, rather than re-slicing the economic pie as it sees fit, then tax competition is a good check against excessive interventionism. In other words, are you more worried about too little government or too much?
Or maybe you think it's the job of the government to not only facilitate voluntary exchange by protecting property rights, but to do other stuff too (like, say, provide for a national defense, or put murderers in prisons). And maybe, just maybe, the government needs money to do some of that other stuff. Now I don't want to get too crazy here, but maybe the best way to collect the money -- dare I say the most efficient way? -- is through a system of progressive taxation. Of course, then the government would be protecting property rights and "tak[ing] from Peter to pay Paul." What a weird world that would be! Luckily, we don't have to worry about the implications of international tax competition in such a world, because that world obviously doesn't exist. But pretend for a moment that such a world does exist: that governments both protect property rights and take from Peter to pay Paul. Then some countries would still become nations of Peters, leaving all the Pauls to fend for themselves (because the Peters would leave any country that slices the economic pie). That would make it impossible for countries of Pauls to have an efficient system of progressive taxation, seeing as they would lose all vertical efficiency in their tax codes. Is it possible, then, that all-out international tax competition might not be such a hot idea? Nah. We better stick with the "slicing-the-economic-pie vs. growing-the-economic-pie" example. It's much more realistic that way.

24 comments:

Gabriel said...

How much of the existing governmental expenditure, in different countries, is allocated to defense and police?

It's a reasonable conjecture that even with a < 10% flat tax you could fund extensive defense and police expenditure, at least at current levels, especially if you get rid of nonsense B.S. like "the war on drugs". -- Also, you might be less likely to engage in risque foreign adventures like Iraq and such.

Optimal taxation to finance a given target level of expenditure (e.g. defense and police) says "Tax least elastic supply." Got any proof that high income individuals have the last elastic supply? -- Overall, it seems to me that your claim that progressive taxation is the most "efficient" might be best rephrased as "the most socially preferable" or something, because I just don't see it...

Economics of Contempt said...

Tax policy requires both vertical and horizontal efficiency. A flat tax is massively regressive, and is vertically inefficient. The opportunity cost of many public goods differs dramatically among high- and low-income individuals. I'm not saying that the U.S.'s progressive taxation system is necessarily efficient (lord knows it's not), but the principle that some level of progressive taxation is efficient (both vertically and horizontally) is, as far as I know, not seriously disputed.

Do I have proof that high income individuals have the least elastic supply? Yes, there's mountains of evidence. Just off the top of my head, I can point to this classic JPE paper:

"The short-run elasticity of taxable income with respect to the net-of-tax share exceeds one in this sample, but the elasticity after one year is at most 0.4 and probably closer to zero. Breaking out the tax responsiveness of different types of compensation shows that the large short-run responses come almost entirely from a large increase in the exercise of stock options by the highest-income executives in anticipation of the rate increases. Executives without stock options, executives with relatively lower incomes, and more conventional forms of taxable compensation such as salary and bonus show little responsiveness to tax changes."

Thach Nguyen said...

kích thước cậu nhỏ
cách trị suất tinh sớm
phương pháp chữa bệnh suất tinh sớm
keo dai thoi gian quan he
ăn gì để tăng số lượng tinh trùng
thuc pham giup tinh trung khoe

jaring pengaman said...

Nice article, thanks for the information. It's very complete information. I will bookmark for next reference
jaring futsal | jaring golf | jaring pengaman proyek |
jaring pengaman bangunan | jaring pengaman gedung
http://www.jual-jaring.blogspot.com/
http://www.agen-jaring.blogspot.com/
http://www.pancasamudera-safetynet.blogspot.com/
http://www.toko-jaring.blogspot.com/
http://www.pusat-jaring.blogspot.com/
http://jualjaringpengaman.blogspot.com/
https://pancasamudera.wordpress.com/
https://pasangjaringfutsal.wordpress.com/
https://jualtambangmurah.wordpress.com/
https://tokojaring.wordpress.com/
https://jualjaringfutsal.wordpress.com/
https://jaringfutsal.wordpress.com/


Fire Ball said...

Bạn đang tìm mua điện máy cũ tphcm? Bạn chưa biết tìm nơi để mua máy lạnh giá rẻ tphcm? Nếu vậy hãy đến với thằng ghờm shop chúng tôi. Chúng hiện đang bán các loại máy giặt cũ tphcm, máy lạnh cũ,... Nếu bạn cần tìm nơi bán tủ lạnh cũ tại tphcm thì chúng tôi cũng đáp ứng tốt yêu cầu của bạn.
Nếu bạn thắc mắc fa nghĩa là gì thì hãy ghé qua ngôi nhà kiến thức để tìm hiểu nhé.

Michael Twin said...

Nice Post, Thanks for your very useful information... I will bookmark for next reference

Michael Husen said...

I kno w whe re I'm go ing and I kno w t he truth, and I do n't have to be what yo u want me to be. I'm free to be what I want .t hankyo u i re ally lo ve it... ..........

Sopia Sonya said...


I wa s a bo ut to sa y some thi ng o n this topi c. But now i can see that e ve rything o n this to pic i s ve ry amazing and mind blo wing, so i have nothing to say he re . I am just goi ng through a ll the to pics and bei ng appre ci ate d. Tha nks fo r sha ring.

Michael Husen said...

Exc eilen t blog you hav e her e but I was cur ious abou t if you kn ew of any communi ty forums tha t cover th e sam e topics talked about in th is art icle? I’d really l ike to be a part of onlin e communi ty where I can ge t adv ice from o ther exper i enc ed ind ividuaIs tha t share the sam e in teres t. If you have any sugg es tions, please le t me know. Apprec ia te it!

Michael Husen said...

Exc eilen t blog you hav e her e but I was cur ious abou t if you kn ew of any communi ty forums tha t cover th e sam e topics talked about in th is art icle? I’d really l ike to be a part of onlin e communi ty where I can ge t adv ice from o ther exper i enc ed ind ividuaIs tha t share the sam e in teres t. If you have any sugg es tions, please le t me know. Apprec ia te it!

Michael Husen said...

I really liked this part of the article, with a nice and interesting topics have helped a lot of people who do not challenge things people should know... you need more publicize this so many people who know about it are rare for people to know this, Success for you. softtonice | canon support | drivers and software

Michael Husen said...

I know where I'm going and I know the truth, and I don't have to be what you want me to be. I'm free to be what I want.Thankyou i really love it, softtonice | canon support | drivers and software

Sopia Sonya said...

I really liked this part of the article, with a nice and interesting topics have helped a lot of people who do not challenge things people should know... you need more publicize this so many people who know about it are rare for people to know this, Success for you. softtonice | canon support | drivers and software

Michael Husen said...

I was about to say something on this topic. But now i can see that everything on this topic is very amazing and mind blowing, so i have nothing to say here. I am just going through all the topics and being appreciated. Thanks for sharing, softtonice | canon support | drivers and software

Michael Husen said...

I really liked this part of the article, with a nice and interesting topics have helped a lot of people who do not challenge things people should know... you need more publicize this so many people who know about it are rare for people to know this, Success for you. softtonice | canon support | drivers and software

Michael Husen said...

I know where I'm going and I know the truth, and I don't have to be what you want me to be. I'm free to be what I want.Thankyou i really love it, softtonice | canon support | drivers and software

Sopia Sonya said...

I wish you much fun with my comments, perhaps this blog will be a great blog someday I hope, I really liked this part of the article, with a big and interesting topic has helped a lot of people who don't oppose things that people should know, thanks a lot.

Steven Jenet said...

a was about to say something on this topic. But now i can see that everything on this topic is very amazing and mind blowing, so i have nothing to say here. I am just going through all the topics and being appreciated. thanks for sharing.

Michael Husen said...

I really liked this part of the article, with a nice and interesting topics have helped a lot of people who do not challenge things people should know... you need more publicize this so many people who know about it are rare for people to know this, Success for you. softtonice | canon support | drivers and software

Sopia Sonya said...

I really liked this part of the article, with a nice and interesting topics have helped a lot of people who do not challenge things people should know... you need more publicize this so many people who know about it are rare for people to know this, Success for you. softtonice | canon support | drivers and software

Michael Husen said...

I was about to say something on this topic. But now i can see that everything on this topic is very amazing and mind blowing, so i have nothing to say here. I am just going through all the topics and being appreciated. Thanks for sharing

Michael Husen said...

thanks for the best blog. it was very useful for me. keep share information such ideas in the future as well. thanks for information the useful. I think i need it!

Michael Husen said...

i wish you much fun with my comments, perhaps this blog will be a great blog someday I hope, I really liked this part of the article, with a big and interesting topic has helped a lot of people who don't oppose things that people should know, thanks a lot.

Moha Taufan said...

Thanks for Sharing That... Sucses for You

findaunionprinter

findaunionprinter

getoifile

getdriversforpc

offlineinstallerfilehippo

theprinterdriver

esoftpedia

filehorse

thesoftpedia