Conservative Wishful Thinking

Scott Sumner discusses Progressive dismissal of the Laffer curve. Specifically he states:

Instead they argue that the lower European GDP/person represents mysterious cultural differences, a preference for leisure,

I've long thought the effect of taxation on work was overblown. If we taxed 40% of GDP for military and nothing else, people would work far more than if we taxed 40% of GDP and fully funded health care and pensions. Once health care and retirement are taken care of, people will work less. There is evidence for this in the CBO report for ACA (from factcheck.org):

In fact, CBO did not predict a 650,000 job loss. The Republican report cites a CBO report from August, which actually said that the economy will use less labor primarily because many people will choose to work less, or retire early, as a result of the new law. (See Box 2.1, pages 48 and 49.) What CBO projects is mostly a reduction in the supply of labor, which is not the same as a reduction in the supply of jobs.

In other words, it's not so much taxes discouraging work, as the benefits taxes pay for discouraging work. I don't consider myself atypical, and I can tell you for certain that I would retire earlier, or change to a more leisurely, lower paying profession if I didn't worry about paying for healthcare. Healthcare is the largest uncertainty in my future spending.

I'm not saying it's right to fully fund healthcare and pensions, in fact I would lean toward only partial funding in the interest of more growth, but to ignore the benefits provided by European countries compared to the U.S. and put all the blame on taxation is simply wrong.

Easy Fix: What About Immigration?

Not the illegal kind, mind you. Consider the bulk of our current issues:

1. We have far too many housing units.
2. We have far too many old people. (putting immense pressure on the old people entitlements: social security and medicare)

Shouldn't we be importing young people with means at a mad clip to fill these housing units and re-balance our aging population?

Fixing Copyrights

Copyrights are a deliberate economic inefficiency whereby an author of a work can make money on a large investment despite the ease of which it can be copied. The problem is, despite distribution basically becoming free, distributors still want the same high cut of the proceeds they used to get from stocking cds or books on bricks and mortar stores.

The other problem is, large companies (Disney in particular) make enough money that they can influence the copy protection mechanism well past its useful life for the benefit of only a few copyright holders such as themselves. Do we really need to copyright material 75 years past the author's life for an author to want to produce a new work? Not likely.

There are two solutions to rent-seeking in general - progressive taxation which is inefficient, or simply reducing the rent-seeking activity. For copyrights I propose to combine them - make companies pay to extend their copyrights. And make them pay more to renew copyrights for every year past the author's death. Those that are not worth extending go to public domain and no longer hurt technological advancement in media delivery. Feel free to extend this idea to lucrative patents as well.

It will not be long before distributors are supplanted by trusted critics simply pointing us to the author's websites directly. Along the way they've made the road rocky for people who invent extremely efficient distribution techniques (p2p, media compression etc.) which are supposed to help overall economic efficiency. We should be as happy about the death of music distributors as we are the death of iceboxes and steam engines. They are simply not required anymore.

Interesting

The tax foundation releases an interesting statistic showing that the rich in the U.S. pay the largest share of personal and payroll taxes of any OECD country. I don't think it includes VAT, which would likely increase the progressiveness of the U.S. system since it has none.

This sentence is also interesting:

Interestingly, countries with top personal income tax rates that are higher than in the U.S., such as Germany, France, or Sweden, have ratios that are closer to 1 to 1. Meaning, the share of the tax burden paid by the richest decile in those countries is roughly equal to their share of the nation's income.

I know this can be shown in the U.S. over time as well - when top marginal tax rates were lower, the highest earning 10% earned a smaller share of overall income. So keep in mind that there seems to be a reverse correlation between the actual average tax rates the rich pay and their share of the overall burden. In other words, they are not actually hurting to pay this large a percentage of overall taxes even if sometimes these comparisons are meant to show how unfair our system is.

h/t Greg Mankiw

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Update:

Matt Yglesias points out that it also doesn't include US regressive taxes - State and Local (he's wrong that it does not include payroll though). And he fails to mention it does not include VAT.

and Karl Smith comments.

About Unions

The Wisconsin situation has most of the blogs I read talking about unions. I think that unions have largely outlived their usefulness - but I appreciate them for what they've done for us in the past. That said, at worst I see them as a source of economic inefficiency and rent seeking. If you must complain about unions, also consider complaining about all forms of rent seeking: American Dental Association, American Medical Association, hairstylist licensing, lobbying etc.

All of these things, and unions, have a common thread - using the political system to limit the pool of people in their profession or industry, which raises their compensation and costs for the rest of us.

Now, I'm not saying we should do away with medical licensing. But there should be an easier path from say, an experienced physician's assistant to doctor. You should be able to get your teeth cleaned and berated for your flossing habits by a hygienist without them needing to be supervised by a dentist.

I'm all for increasing efficiency, but we should not fool ourselves into thinking removing the last few teeth from public sector unions are the only answer.