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You can find many studies that show a negative impact. You can also find many that show no effect (eg, https://itep.org/wp-content/uploads/guide8.pdf https://it

You can find many studies that show a negative impact. You can also find many that show no effect (eg, https://itep.org/wp-content/uploads/guide8.pdf https://itep.org/wp-content/uploads/guide8.pdf). Among those that show a negative impact, many are either based on models rather than real-world data (like the one you cite, for example), or are examples of cherrypicking, where an impact is shown over a short period in a single nation. But even in studies where there is an effect, it is usually small. For example, https://www.ntanet.org/NTJ/49/4/ntj-v49n04p617-42-taxation-economic-growth.pdf https://www.ntanet.org/NTJ/49/4/ntj-v49n04p617-42-taxation-e... notes "In general, studies of taxation using cross-country data suggest that higher taxes have a negative impact on output growth, although these results are not always robust to the tax measure used." Translation: the effect is ephemeral depending on how you measure the tax rates. Hardly a ringing endorsement. Common sense suggests that if there were truly unambiguous evidence that high marginal tax rates truly harm the economy significantly, the left and the right would be united in championing lower taxes. This is not climate change; there is no broad scientific consensus being resisted by a handful of special interests. There is genuine confusion in the field on this issue, and the absence of a clear answer itself suggests that the effects are minor if they exist at all.

eru 9y ago
Thanks. I'll have to look through that material! My 'bayesian' prior is that marginal tax rates should matter much more than total tax take (especially if the total take is well spent); and that micro-economic considerations suggest prima facie that blunting the incentives to produce less (income) more should lead to less production (of income). (That's the whole point eg behind a carbon tax.) But I'd be interested in what kind of material would be able to overcome that prior. (Intellectually, I find the Georgism appealing (https://en.wikipedia.org/wiki/Geolibertarianism https://en.wikipedia.org/wiki/Geolibertarianism). In practice, growing up in Central Europe, I've seen that social democracy works OK, even if not great. Singapore seems to be doing lots of things right. But of course, it might be hard to say exactly which parts of the mix are salient.) After first very brief skimming: the paper on 'ntanet' treats a cut of marginal tax rates by 5% as major. Moving to LVT as single tax would cut all the marginal tax on labour and capital---quite a bit outside their studied parameters. Another thing that I'll keep in mind when studying the material is that advertised marginal tax rates are often not the real marginal tax rates: people shift their behaviour to eg in the US take extra compensation in the form of lower taxed health-insurance than more cash in hand. (And rich people who can afford lawyers have even more scope. See Buffets lament that he's paying less tax on his income than his cleaner.) Sorry for the rambling. Happy to continue discussion via email, as we might be reaching HN's soft limit on thread-depth soon.

eru 9y ago

Thanks. I'll have to look through that material! My 'bayesian' prior is that marginal tax rates should matter much more than total tax take (especially if the total take is well spent); and that micro-economic considerations suggest prima facie that blunting the incentives to produce less (income) more should lead to less production (of income). (That's the whole point eg behind a carbon tax.) But I'd be interested in what kind of material would be able to overcome that prior. (Intellectually, I find the Georgism appealing (https://en.wikipedia.org/wiki/Geolibertarianism https://en.wikipedia.org/wiki/Geolibertarianism). In practice, growing up in Central Europe, I've seen that social democracy works OK, even if not great. Singapore seems to be doing lots of things right. But of course, it might be hard to say exactly which parts of the mix are salient.) After first very brief skimming: the paper on 'ntanet' treats a cut of marginal tax rates by 5% as major. Moving to LVT as single tax would cut all the marginal tax on labour and capital---quite a bit outside their studied parameters. Another thing that I'll keep in mind when studying the material is that advertised marginal tax rates are often not the real marginal tax rates: people shift their behaviour to eg in the US take extra compensation in the form of lower taxed health-insurance than more cash in hand. (And rich people who can afford lawyers have even more scope. See Buffets lament that he's paying less tax on his income than his cleaner.) Sorry for the rambling. Happy to continue discussion via email, as we might be reaching HN's soft limit on thread-depth soon.