I think Bill accidentally sent this to me privately instead of the list.
Subject:
Re: Laffer Curve
From:
William Dickens <[EMAIL PROTECTED]>
Date:
Wed, 20 Apr 2005 16:31:33 -0400
To:
[EMAIL PROTECTED]
>>I'll bite. I completely agree with Bill in the short-term. Higher
>>taxes raise revenue. But I also have a sneaking suspicion that
higher
>>tax rates in the long run may hurt growth so much that the present
value
>>of taxes would be higher if rates were lower.
And I have a sneaking suspicion that more equitable distributions of
income lead to less social conflict and rent seeking and lead to higher
growth. Unlike you I can point to some theoretical and empirical studies
that back my suspicion up (though I wouldn't bet my life on it being
true). My point is that any of us can have sneaking suspicions. Dueling
sneaking suspicions aren't going to bring us any closer to agreement.
>> Just talking to people
>>who grew up in Scandinavia, they frequently tell me that high taxes
had
>>no effect on the older generation. But (combined with the welfare
>>state) they raised a generation of shiftless, no-ambition slackers.
If
>>the U.S. had Swedish-level taxes during the 80's, I suspect it would
>>have been a far less entrepreneurial and innovative economy in the
90's.
Two thoughts. First, the empirical studies on the effects of
distribution of income on growth suggest no such effect. But I have no
idea how robust those results are and wouldn't be at all surprised if
they allowed for some range of results if properly done. Personally I
have little doubt that the various forms of welfare (not progressive
taxation) do tend to destroy initiative among some parts of the
population. I've had too much personal experience with smart, talented
people getting caught up in welfare programs and not going anywhere not
to suspect that this is a serious draw back of such programs. That's why
I very much like to tightly time limit any generous welfare program.
However, I have to admit that I don't know that there just aren't
slackers in the world (some talented and bright) who would find parents,
friends or some other less desirable way to support themselves if there
weren't welfare programs. I don't know of any cross national study of
long term welfare participation (OECD might have some aggregate study of
this). The European Community Household Panel could be combined with the
GSOP and the PSID or SIPP to good end to do such a study. Any graduate
students out there looking for a thesis topic?
- - Bill Dickens
William T. Dickens
The Brookings Institution
1775 Massachusetts Avenue, NW
Washington, DC 20036
Phone: (202) 797-6113
FAX: (202) 797-6181
E-MAIL: [EMAIL PROTECTED]
AOL IM: wtdickens
--
Prof. Bryan Caplan
Department of Economics George Mason University
http://www.bcaplan.com [EMAIL PROTECTED] http://econlog.econlib.org
"[M]uch of the advice from the parenting experts is flapdoodle.
But surely the advice is grounded in research on children's
development? Yes, from the many useless studies that show
a correlation between the behavior of parents and the
behavior of their biological children and conclude that
parenting shapes the child, as if there were no such thing as
heredity."
--Steven Pinker, *The Blank Slate*
