Wednesday, November 23, 2011

Thoma on Taxing the Rich vs. Growth and Other Links to Enliven Your Econ Course

Mark Thoma offers his opinion as to Why America Should Spread the Wealth: "If those at the top of the income distribution receive far more than the value of what they create, and those at lower income levels receive less, then one way to correct this, at least in part, is to increase taxes at the upper end of the income distribution and use the proceeds to protect important social programs that benefit working-class households, programs that are currently threatened by budget deficits." He acknowledges, however, that beyond a point, there may be a tradeoff between achieving greater equality through taxation, on the one hand, and stimulating growth, on the other. My thought: Greater emphasis should be placed on the difference between raising marginal tax rates on the rich (for example, by letting the Bush tax cuts expire) and undertaking true tax reform. The latter would eliminate loopholes and cut tax rates in a way that simultaneously raised average tax rates on upper-income households while cutting their marginal tax rates. Such a policy could promote both growth and equality, while achieving fiscal consolidation at the same time. (For more on growth-friendly fiscal consolidation, see this earlier post.)

In a recent post on Economonitor, Paolo Manasse and Giulio Trigilia provide evidence that markets are now perceiving a general euro risk rather than confining the perception of risks to just a few countries. They argue that Italy's weak fundamentals, which cannot be cured by a simple change of government, lie behind the emergence of generalized euro risk.

Scott Sumner, drawing on work by Timothy Taylor, calculates that the Transport Safety Administration is killing 100 people (equivalent to the crash of a medium-sized airliner) every month. That happens because longer waiting times at airport security since 9/11 divert a large amount of traffic to the highways, where fatalities per passenger mile are far higher than for commercial air travel.

Follow me on Twitter @dolanecon to get more links like these to enliven your econ courses.

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