Friday, December 14, 2007

Will Work for Nothing in Particular

Mark Thoma, once more hunting the "Tax Cuts Pay for Themselves" snark, offers a concise summary (from one "Alex") (link):

1. Mr. Laffer did state the evident and nothing else: (1) if government will collect 100% nobody will show up for work, (2) if government won't collect nothing it will have no revenues and (3) there is a maximum somewhere in between.

I'm in sympathy with the general line of argument here, but I don't think it is quite right. My intuition is that even at 100 percent , some work would get done. I'm not for 100 percent taxes, and I do think taxes can dampen productivity. But the fact is, a lot of work gets done for reasons that have nothing to do with money. The best evidence is before us everywhere--the Richter 9 explosion of free content available on the web. Apparently the world is full of people who will work flat-out, nights and weekends especially, at a labor price of zero. Hard to see how taxes will affect them, one way or another.

An Asssignment for Somebody Else: Might be fun for somebody--perhaps an Econ 10 slut to plot the productivity of, say George Mason Econ professors, against changes in the marginal tax rate, to see if they can identify any effect.

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