Source: Tom Sargent "The Ends of Four Big Inflations
The shrewdest summary of rational expectations economic policy was by Paul Samuelson
02 Feb 2015 Leave a comment
in business cycles, fiscal policy, inflation targeting, macroeconomics, monetary economics Tags: new classical macroeconomics, Paul Samuelson, policy credibility, rational expectations, regime uncertainty, Stephen Williamson, time inconsistency, Tom Sargent
Stephen Williamson on Marginal Taxation
03 Aug 2014 Leave a comment
in applied welfare economics, fiscal policy, income redistribution, politics - New Zealand, politics - USA, Public Choice Tags: envy, Stephen Williamson, taxation and entrepreneurship, taxation and human capital, taxation and investment, taxation and labour supply, top 1%
He says a lot. I’ll try to address piece by piece.
Next, some people have shown interest in this paper by Diamond and Saez. A key result that seemed to get these people excited is the calculation of a top optimal marginal tax rate (including all taxes) of 73%, relative to the current rate of 42.5%. There are two key assumptions that Diamond and Saez make to come up with the 73% optimal rate. First, we should not care about the welfare (at the margin) of the rich people. This argument is based solely on the notion that marginal utility of income is low for the top income-earners. Second, Diamond and Saez use a “behavioral elasticity” of tax revenue with respect to the tax rate of 0.25. To see how this matters, if you use their formula and an elasticity of one, you get an optimal top tax rate…
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