Substantive arguments against tax increases

By Megan McArdle

Will Wilkinson quotes Martin Feldstein:

[F]inancing additional government spending by an acrosss the board rise in all marginal tax rates would make the cost per dollar of government spending equal to $1.76.

These two facts — that the actual revenue is only 57 percent of the static gain and that the deadweight loss is 76 cents per dollar of revenue — should be central to any consideration of tax policy. And yet they are not.


It is possible that the state can make its citizens better off by taking $1.76 to spend $1.00, if those very expensive dollar bills are spent on highly valuable public goods folks can’t coordinate to provide privately. But I reckon this kind of bona fide public good is a pretty small part of the existing budget.



At the very least, it's the sort of thing you have to factor into arguments that we as a nation can save money via nationalised health care . . .

This article available online at:

http://www.theatlantic.com/business/archive/2007/09/substantive-arguments-against-tax-increases/1884/