Yglesias highlights a paper from Diamond and Saez on optimal taxation.
As an illustration using the different elasticity estimates of Gruber and Saez (2002) for high income earners mentioned above, the optimal top tax rate using the current taxable income base (and ignoring tax externalities) would be τ*=1/(1+1.5 x 0.57)=54 percent while the optimal top tax rate using a broader income base with no deductions would be τ=1/(1+1.5 x 0.17)=80 percent. Taking as fixed state and payroll tax rates, such rates correspond to top federal income tax rates equal to 48 and 76 percent, respectively.
I see some confusion on this issue so I just want to point out the following. The optimal tax rate, the peak of the Laffer Curve, and the tax rate that maximizes GDP are all different things. Moreover, they can have almost any relationship to one another.
That is it could be that the optimal…
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Last Thursday. March 2, the distinguished Professor Charles Murray was invited to speak at Middlebury College in Vermont on his most recent book Coming Apart and how it related to the recent election. Plans for protests began to emerge, encouraged by several faculty members. The logic, Dr. Murray says, that “since I am a racist, a white supremacist, a white nationalist, a psuedoscientist whose work has been discredited, a sexist, a eugenicist, and (this is a new one) anti-gay, I did not deserve a platform for my hate speech, and hence it was appropriate to keep me from speaking.”
The lecture hall was filled to capacity, about 400, half of whom had come to hear the lecture, the other half to protest. The protesters had scripts to read from and screamed enthusiastically, but had no idea what they were screaming about. The students got violent, the Political Science professor who…
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While President Trump apparently intends to waste taxpayer money for more childcare subsidies and presumably is going to duck the critical issue of entitlement reform, there is some good news for advocates of limited government and fiscal responsibility. According a recent news report., he’s not a big fan of outlays for foreign aid.
The White House budget director confirmed Saturday that the Trump administration will propose “fairly dramatic reductions” in the U.S. foreign aid budget later this month. …news outlets reported earlier this week that the administration plans to propose to Congress cuts in the budgets for the U.S. State Department and Agency for International Development by about one third. …The United States spends just over $50 billion annually on the State Department and USAID.
Trump’s skepticism of foreign aid is highly appropriate. Indeed, he’s probably being too soft on the budget for foreign aid.
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For the leader of the National Party, Bill English, that is, for announcing yesterday that if his party is in government after September’s election it will seek to
(a) lift the residency requirement from 10 years to 20 years, starting some way down the track, and
(b) lift the age of eligibility for New Zealand Superannuation from 65 to 67, but not starting until 2037.
It is a topsy-turvy political world in which at the last election the National Party was campaigning on, in essence, no changes to NZS ever (talk of everything being “affordable” for the next 50 years), while the Labour Party was campaigning on a rather faster move to age 67 than the National Party is proposing now. But now the Labour Party appears staunchly opposed to any increase in the eligibility age. Perhaps if Bill English and David Cunliffe had held the reins at the same…
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