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July 01, 2007



Thanks Chris; that was instructive.

William McIlhagga

"assuming people are paid their marginal product"??

A bit like saying

"assuming pigs can fly"

chris strange

Wouldn't option 1 also have the negative affect of being very regressive?

I must say that the idea of autioning tax breaks does sound rather interesting, and would certainly spur on the people that buy them on to try and work especially hard while their permits last so as to actually make buying them worth their while. I would expect that they could well become status symbols pushingup the price even higher, making it even harder to justify them in purely financial terms. I cannot seeing it politically viable though, especially if they become status symbols.


I suspect what this post needs is some extra analysis of how much "economic efficiency" is connected to the incentive level of taxation on very high earners and perhaps some comparison of the benefits with the negative effects.

Everyone might be wrong to complain, but were' missing some steps in proving it.

Mark Wadsworth

1. Consumption tax (i.e. turnover tax, i.e. VAT) is the worst kind of tax (far more damaging than corporation tax), and is regressive as Chris S says above.

2. Land Value Tax - super idea (why is there such a large overlap between LVT and CBI enthusiasts?) - let's have more of this and a lot less of everything else.

3. Auctioning permits - gimmicky nonsense to be frank, although interesting thought experiment.


If all these top earners moved overseas would we notice?


"If a high marginal tax rate deters a minimum wage cleaner from working an extra hour, society only loses £5.35 worth of output - no big deal.

But if it deters a top earner from working an extra hour, we can (assuming people are paid their marginal product) lose hundreds of pounds of output."

Just a couple of observations from someone coming at this from a completely different background:

Aside from the assumption stated - there's also the inherent assumption here that people are always motivated proportionally to the total money they are paid. For my money social status is a much bigger motivator, and that's only loosely linked to money - and more to relative pay than absolute pay.

And the other assumption seems to be that if 'output' is reduced (irrespective of the external impacts of production of that output), 'we' will automatically be disadvantaged by that.

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