Mark Thoma sends us to the new Journal of Economic Perspectives paper on optimal taxes by Peter Diamond and Emmanuel Saez. Itâ€™s a tough read (Iâ€™m still working on it myself), but thereâ€™s one discussion that I think helps make a useful point about current political debate.
In the first part of the paper, D&S analyze the optimal tax rate on top earners. And they argue that this should be the rate that maximizes the revenue collected from these top earners â€” full stop. Why? Because if youâ€™re trying to maximize any sort of aggregate welfare measure, itâ€™s clear that a marginal dollar of income makes very little difference to the welfare of the wealthy, as compared with the difference it makes to the welfare of the poor and middle class. So to a first approximation policy should soak the rich for the maximum amount â€” not out of envy or a desire to punish, but simply to raise as much money as possible for other purposes.
Now, this doesnâ€™t imply a 100% tax rate, because there are going to be behavioral responses â€“ high earners will generate at least somewhat less taxable income in the face of a high tax rate, either by actually working less or by pushing their earnings underground. Using parameters based on the literature, D&S suggest that the optimal tax rate on the highest earners is in the vicinity of 70%.
OK, I hear loud screams from the right side of the room. Parsing those screams, I hear the following arguments:…[Rest of article]
…is the name of a movie that popped up on my “Recommended” list on Netflix, so I gave it a watch last night (on “Watch Instantly”). I had never heard of it, but it was well-reviewed. Wow! Robin Wright Penn gave a jaw-dropping performance, which alone made the movie worthwhile to me. I doubt that it did well in the theaters back in 2005, with its still-a-bit-fresh-after-9/11 theme, but again–this woman can act!
In case you missed it. Naive little old me–I thought these guys were required to all have “blind trusts“. It’s time to clean house in both parties:
Some new stuff on my screen this time (including technology company Lenovo, which I darned near pulled the trigger on), but this week’s pick stood out above the rest and so all of my eggs are going into the Measurement Specialties Inc. (MEAS) basket. They make sensors and other, well, measuring type stuff.
Hmmm…now that I think of it, all four of the stocks I was looking at closely were tech stocks–which is a little unusual for me. Like Warren Buffett, I’m not wild about investing in things that I’m clueless about. Nevertheless, Measurement Specialties, Inc., it is.