Mankiw (in about 3 different recent posts-the most recent one being here) argues in favor of 80's supply-side economics on pretty much all counts: incentives to work, tax cuts for high martginal tax rates (of the rich) to create increased labor output (at the higher ends of marginal productivity), tax cuts are revenue creating to a large degree (though he admits they don't completely offset the loss in revenue from the tax cut). ...
Don't get me wrong, I like supply-side policies (just not "Supply Side Economics" with a capital S). I think cutting taxes on the more productive members of our society can be good - but only when tempered with decreased government spending in some of the more wasteful areas of our government (like Gerorge Bush's salary). I am not a tax and spender, but I am also not a tax cut and spender.
I also don't know why we don't hear about tax cuts for the poor - under the understanding that, theoretically (data as well?) they would be more likely to work more given a tax cut then a person already making a nice living for him/herself. Of course, you wouldn't have much revenue gains from the incentive to work by giving tax cuts to the poor, or as big a productivity kick....but it would be something! Again, provided there would be reduced government waste or an increase in a more efficient tax, like consumption taxes (which I like). But, government wants the big revenue for the big spending. And you did get that from the little guy - even though, on an individual basis, that tax cut could mean a great deal.
Of course, one could argue poor people don't pay much tax now anyway. And, there are certainly a plethora of support programs for the poor....
UPDATE: Mr Frank's Excellent response to Mankiw in which I quite agree with most everything he says....
No comments:
Post a Comment