Tuesday, April 06, 2010

Scott Sumner swats Ryan Avent

on his behind.

Scott concludes:
Here’s my challenge to progressives (not necessarily Avent, I don’t know his views.) Progressives tend to be skeptical of the supply-side argument that higher taxes sharply cut real GDP growth. Let’s suppose the US raises its average tax rates to French levels (from .282 to .461.) Without behavioral changes, that increase should raise tax revenue (PPP) from $13,097 to $21,410. Out of the hundreds of countries in the world I want some progressive to find just one that is bigger than a postage stamp and doesn’t rely heavily on oil exports, and which raises even close to $21,410 per person. I claim it can’t be done, and I claim the reason it can’t be done is that (unless one is blessed with large oil deposits) the Laffer curve peaks at a level much lower than $21,410 (for whatever year Mankiw used in his data.) My hunch is that Denmark and Sweden are near the peak. And I doubt the US would even be able to match their tax take. Apart from taxes, those two countries actually have pretty efficient economic models.

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