I was gonna let this go, but I can't because it's Yglesias, who is generally well respected, even by me.
The other day I quoted from Michael
Hiltzik's article on Elizabeth Warren and inequality:
Brynjolfsson schooled Dell by informing him that from the 1940s through the 1960s the top rate on income ran as high as 94%. “Those were actually pretty good years for growth,” he said.
I've seen this particular sleight of hand too many times: A tax-rate fact and a growth fact, one after the other, along with the implied conclusion that HIGH TAX RATES ARE GOOD FOR GROWTH.
That conclusion is bullshit.
I complained that Hiltzik seemed pleased with the argument, and I wrote:
The years from the late 1940s through the 1960s were better than "pretty good" years for growth. And income tax rates were definitely high. But there is no reason to assume that high tax rates on income were the cause of the good growth; that is fantasy.
What one can say with confidence is that high tax rates did not make good growth unattainable. And really, this is all one needs to say about tax rates and growth.
But it does need to be said.
My morning workout today brought me to
Economist's View, where Thoma links to
I jumped on it, because Bernstein and I agree that it needs to be said.
His article is very good, Bernstein's. He says:
... there’s no persistent correlation between top tax rates and growth rates across the US time series, nor in oft-cited international data from Saez et al. This is widely understood among empirical public finance folks ...
He says there is no persistent correlation suggesting high tax rates are good for growth, and there is no persistent correlation suggesting high tax rates are harmful to growth.
Interesting stuff, with a far better quality of argument than the one in the Hiltzik article, an argument so bad that they dare not do more than imply the conclusion.
At one point Bernstein says
To be clear, I neither think nor claim that higher top rates lead to faster growth (though such a case is sometimes made).
Well you know I had to check out the link. And that gets us to Matthew Yglesias.
In
Study: tax hikes could grow the economy at VOX, Yglesias writes:
At the core of Washington's economic-policy debate is a premise shared by both Democrats and Republicans: raising taxes on the rich will hurt the economy by discouraging super-talented, super-productive rich people from working as hard.
"... as hard" as what? How about "
...so hard" instead? Or finish the thought: "... as hard as they do."
Somethin.
But in a recent paper "Taxation and the Allocation of Talent," Benjamin Lockwood, Charles Nathanson, and Glen Weyl challenge that assumption. Higher tax rates, they argue, could push talented individuals to eschew lucrative-but-socially-useless jobs in favor of more broadly beneficial careers in teaching and research.
Let me skip over all the parts where Yglesias tries to make this sound like a good idea, and get right to the problem:
The authors show that under a variety of plausible assumptions the socially optimal top marginal income tax rate is very high — in the 70 to 90 percent range — largely because high tax rates would deter talent entry into finance and encourage talent entry into research/academia and teaching...
So really what they're saying is
finance is the problem.
... talent entry into research/academia and teaching. The authors also find that this sort of high tax regime is a distinctly second-best policy alternative and that the vast majority of the benefits could be captured with fewer unintended consequences through hypothetical more targeted policy measures aimed at specific occupations.
In order to make the high-tax idea really work, you'd have to decide which jobs are beneficial to society and which are harmful, arrange tax rates to favor the one and discourage the other, and tax the different jobs at different rates. That's a graphic picture of early-stage dystopia. Decline of civilization stuff.
Who gets to decide what's beneficial and what's not? What if they're wrong? And, as always: Who keeps an eye on the decision-makers, making sure decisions are made to benefit society as a whole? Who assures us that the actual decisions (and not only the assurances they give us) are for our benefit? And who watches the watchers?
Then too, the decisions are subjective, even if they are made with integrity. For example:
To the extent that one believes "starving artists" are making contributions to society not captured by their monetary incomes, the true optimal tax rates will be even higher.
Yglesias, however, seems to like the idea:
Ultimately the paper is an extremely provocative theoretical contribution that suggests a potentially fruitful line of empirical inquiry. Given that the case for higher taxes tends to rest on equality, this research offers an interesting additional consideration.
It seems Yglesias likes the idea because it adds something to the argument for equality. But at this point, I HAVE TO SAY "NO!"
Yglesias is willing to use a very bad idea because he thinks it contributes to a good idea. Do you see how scummy that is? How wrong it is? Do you see how it tends to "dirty" the good idea?
Do you think those people, who at present do not see reducing inequality as a good idea, will be more willing to change their minds because of this study Yglesias is hawking?
I doubt it.
Hayek:
Most planners who have seriously considered the practical aspects of their task have little doubt that a directed economy must be run on more or less dictatorial lines... The consolation our planners offer us is that this authoritarian direction will apply "only" to economic matters...
Economic planning would not affect merely those of our marginal needs that we have in mind when we speak contemptuously about the merely economic. It would, in effect, mean that we as individuals should no longer be allowed to decide what we regard as marginal.
Excerpts from
The Road to Serfdom by F.A. Hayek, Chapter 7.
