Benjamin Studebaker

Yet Another Attempt to Make the World a Better Place by Writing Things

Tag: Optimal Tax Rates

Jeremy Corbyn’s Economic Plan is Not Crazy

Over the past week, I’ve been hearing the rumors. They’re saying that Jeremy Corbyn is crazy–that he’s released an economic plan so radical, so incendiary, so madcap that no reasonable person could possibly support him for Labour leader. I thought to myself “Oh no Jeremy, what could you possibly have done to get these folks so riled up?” So I read the plan. It’s not crazy–indeed, there is significant support in the literature and in recent experience for what Corbyn is proposing.

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Tax Rates and Growth

Last week, I took a look at optimal tax rates, the top rates of income tax which economic research suggests would maximize revenue if implemented as policy. The research suggested that for every 1% higher the top rate of income tax rises, the rich report 0.25% less income. This suggested an optimal top rate of between 73 and 80%. Toward the end of that post, I suggested that it might be the case that even as the rich report lower earnings, the economy as a whole might operate more efficiently at those high rates, if the government is more effective at investment than the private sector. Today I’d like to look at some empirical data to see if there’s any historical basis for that claim. Read the rest of this entry »

How Much Should We Soak the Rich?

There’s broad agreement among the political left in most developed states that we should raise taxes on high earners, if not now then after the economy recovers. The justifications vary somewhat, depending on how one comes at one’s leftism, but in most cases it can be boiled down to the principle of diminishing returns, which holds that the more money you have, the less utility additional money buys you. A homeless person almost always benefits more from a dollar than does a rich person, and if we are seeking to maximize welfare, it is reasonable to redistribute wealth from the rich person to the homeless person. Even some right wingers agree to this, in theory. The trouble is that there is much disagreement as to the extent to which we ought to redistribute empirically. That’s the question I’m going after today.

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