Sunday, August 23, 2009

Surprise: Arthur Laffer was right

Higher tax rates result in less incentive for high income earners to make more money. Taken from Greg Mankiw's blog who quotes a recent article (NYT):

In the three decades after World War II, when the incomes of the rich grew more slowly than those of the middle class, the top marginal rate ranged from 70 to 91 percent. Mr. Piketty, one of the economists who analyzed the I.R.S. data, argues that these high rates did not affect merely post-tax income. They also helped hold down the pretax incomes of the wealthy, he says, by giving them less incentive to make many millions of dollars.

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