Commenting on Yglesias commenting on Crook

Yglesias writes

Government spending on effective social welfare programs is very progressive. The main thing to do, from an egalitarian point of view, is to have a lot of it and to pay for it through whatever taxes are politically viable. Compared to Europe, the American tax code is toward the high end of progressivity, though not off the charts. The big difference, though, is that our overall tax revenues are lower, and a much larger share of our revenues goes to the military. Whatever you do to shift spending from defense to domestic priorities, and whatever you do to increase revenue, is a step in an egalitarian direction.

It may be that it’s easier to raise revenues through taxes on the rich, because they bite fewer people. Beyond that, there are concerns about growth. Certainly I think it’s clear that restoring Clinton-era taxation won’t kill the economy. But over the long run we’ll need even more revenue than that. So I think some consumption taxation may be necessary.

As Yglesias notes, his argument has not practical relevance whatsoever. We do not have to choose between whether to have a generous social safety net or whether to soak the rich. The only remotely politically feasible way for the US get a generous social safety net is raise taxes on the rich. There is overwhelming support for such tax increases (75% in the latest CBS Washington Post poll).

Significantly increasing taxes paid by most US residents is almost certainly politically impossible. Saying it would be OK even if not as good as a progressive increase in taxes is like saying one would rather be turned into a frog than dead. Maybe it would be better, but VAT in the USA is about as likely as Matthew Yglesias turning into a frog.

The fact that non rich people pay high taxes in Europe does not mean that it is an option open to activists or policy makers in the USA.

Yglesias mentions “growth”. The logic of his argument is that Clinton era taxes were fine, but any increase above Clinton era rates is impossible or would have intollerable effects on growth. That is, he either assumes that there is a huge discontinuity in the effects of marginal income tax rates on growth at exactly the Clinton era tax rates or he is making an argument which makes no sense at all.

A plea to my readers (or reader don't want to make false claims about traffic at this blog).

Do you know of any evidence that high taxes on the rich have any effect on growth ? How about any evidence that raising the same amount of money with VAT is better for growth than raising that amount of money by taxing high incomes ? The argument is made very often, so often, that one might imagine there must be some evidence supporting it.

I don’t know of any.