Taxed More And Work Less?
Stan Collender:
Taxed More And Work Less? Barry Ritholtz Slices Up Greg Mankiw: Over at The Big Picture, Barry Ritholtz asks former Bush 43 Chairman of the Council of Economic Advisors Greg Mankiw a bunch of tough questions and, IMHO, shows that the economist is wearing no clothes.
This all started with Mankiw's piece in The New York Times on October 9 in which he said he will work less if the federal tax cuts on those earning over $250,000 enacted during Bush 43 are not extended. Yesterday, Ritholtz responded by asking Mankiw a number of questions.... I've long thought that the argument that higher taxes always lead to less work was more a political statement designed more for sound bite purposes than a proven fact. It has been a staple of GOP political rhetoric ever since, during his 1980 presidential campaign, Ronald Reagan very effectively used the completely unproven story about his deciding not to do any more movies in years when his income got to certain levels because it would have put him into a higher tax bracket to convince people that taxes should be cut.
It's not at all clear to me that not having another movie featuring Ronald Reagan was bad for the country, the economy, or U.S. culture. It's also not clear to me that the movie Reagan say he didn't want to do because of the tax rates wasn't made anyway with some other -- and possibly much better -- actor. In other words, the country as a whole, movie theaters and distributors, and movie watchers in particular were not necessarily worse off in any way because Reagan may have decided not to make another movie.
It should be noted that the same is true of Mankiw. If he turns down the (presumably) hypothetical opportunity he mentions in his column to write an article because of federal tax rates, it's safe to assume that the opportunity will be passed along to some other economist (I'm sure that CG&G's own Andrew Samwick, Bruce Bartlett, and Pete Davis would like to be approached). This is especially the case if the opportunity Mankiw turned down was for a print rather than an online publication that had to fill the space whether or not Mankiw wanted to write a thousand words or so....
Unless you are in the I-have-all-need-to-spend-on-what-I-need-and-want place in life, I can easily make the argument that a higher tax rate is more likely to lead to more rather than less work because you have to work longer and harder to get to the same overall bottom line.
