Sunday, August 14, 2011
Suggestions Welcome
Is there a specific issue in American economics or politics that you would like to read more about? Feel free to leave a comment with a question or suggestion for future posts. If it's something I don't know much about, I'm happy to learn more! And it may just be a topic that I have already planned to discuss, so let me know and I'll do my best to accommodate you.
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I'd like to hear your thoughts about replacing the current stepwise income tax function ("brackets") with a smooth, continuous function that attempts to track the marginal utility of dollars. I feel this is a natural desire for anybody who subscribes to the enlightenment idea that government is here to maximize utility (OK, the enlightenment thinkers didn't put it quite like that, but then they didn't have modern economics). Once we had such a tax structure we could tweak it any number of ways based on empirical data...if we find pushing the top end down a bit from that causes much more growth, we can do that, whereas if we decide social goals warrant flattening, that's trivial as well. Of course I'm in with Milton Friedman on the idea that such a function should go negative at the low end (and for a pretty high low end...I'm thinking anywhere below about $25k in this country), but that's another story.
ReplyDeleteIn any case, I said this offhand one day about 3 years ago (well, OK, it was simpler...somebody said something about a flat tax and I advocated infinite brackets...you know how I am), and I've been thinking about it ever since. But I've never seen anybody think it through to numbers....and I think I know just the man for the job.
The effective tax rate curve for actual income data is definitely something I plan to address, so I think including this will be no problem. It's the best way to show the distortion that Warren Buffett mentioned. The regressive features at the top end should be in the media more frequently.
ReplyDeleteI concur. Mostly I just wonder how one would construct a function like that. I mean, I could draw what I roughly think we should aim for...but getting the right answer would clearly involve a lot of empirical research and fancy theory which I don't really have a hold on.
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