N. Gregory Mankiw surely was aware that his rhetorical threat to stop writing for the New York Times -- if expiration of the Bush tax cuts reduced his net financial incentive -- would inspire a collective howl of sarcasm from the other side.
But Professor Mankiw has raised a point that deserves empirical study. I refer to these paragraphs:
Now you might not care if I supply less of my services to the marketplace -- although, because you are reading this article, you are one of my customers. But I bet there are some high-income taxpayers whose services you enjoy.
Maybe you are looking forward to a particular actor's next movie or a particular novelist's next book. Perhaps you wish that your favorite singer would have a concert near where you live. Or, someday, you may need treatment from a highly trained surgeon, or your child may need braces from the local orthodontist. Like me, these individuals respond to incentives. (Indeed, some studies report that high-income taxpayers are particularly responsive to taxes.) As they face higher tax rates, their services will be in shorter supply.
Do higher tax rates impede vital medical services and cultural creativity? Sweden has the world's highest second total tax burden among industrialized countries and a 56.6 percent top bracket. Yet according to World Health Organization statistics, Sweden significantly outperforms the United States in health care. According to the CIA World Factbook, Swedish life expectancy is fully 2.75 years longer than that of the United States. Of course many differences make direct comparisons misleading. But the point remains that some societies with high marginal taxes don't find their well-being at risk. Likewise, Sweden's notoriously high taxes also haven't reduced literary output, as Professor Mankiw's column suggests they would. And, the Swedish welfare state is one of the greatest things that ever happened to indie rock.
All that doesn't necessarily mean that Scandinavian tax levels are a good thing; of course, they're controversial over there. There may be a price in some categories of mobile talent, witness the absence of Swedish universities among the top 60 on the U.S. News list-- its counterpart to M.I.T.(no. 6) ranks no.150. And social democracy's prospects in the U.S. look discouraging at the moment.
So let's also look at American history and the sky-high marginal tax rates of the Eisenhower and Kennedy years. (See the table of the National Taxpayers Union.) Jonas Salk not only developed polio vaccine (announced in 1955) but is famous for saying that treating it as intellectual property would be like "patenting the sun." And taxes didn't seem to curtail the concert or recording schedules of such "favorite singers" as Elvis and Bob Dylan. John O'Hara, as driven by money as any American twentieth-century writer, also didn't curb his output of novels and short stories. High marginal taxes in the name of national defense after Sputnik helped build the now-imperiled University of California system, once the envy of the world. And if taxation was so deadening to technological innovation and enterprise, why was the Xerox 914 photocopier -- "the most successful product ever marketed in America measured by return on investment," according to Fortune magazine -- developed and launched when the burden on the rich was highest?
There may be good reasons to extend the Bush tax cuts. But cherishing the nation's creative fire isn't one of them.