Sunday, July 15, 2007

One can only guess

P.J. O'Rourke devoted a whole book to the project Eat the Rich. Of course there is the old problem that after we eat, shoot or tax them enough, there won't be any of them left. What would class warriors do then? That's a Laffer Curve problem in extremis.

Greg Mankiw has a fine treatment of federal income taxes ("Fair Taxes? Depends What You Mean by 'Fair'") in today's NY Times. "The rich", those in the top 1%, pay an effective federal tax rate of 31.1% (Mankiw cites CBO data). Of course even if they paid 100% (or much more) that would never silence most populists and politicians. What would they talk about or do all day?

Governments' place in all this is much more complex because there are many other taxes and expenditures that have an effect. The elephants-in-the-room are the fastest-rising-and-most-regressive taxes, the ones that pay for social security and the various parts of medicare.

It's complex enough to obscure the real bottom line. What do the myriad taxes and expenditure programs as a whole do to the income distribution? No one knows.

Is complexity and obscurity convenient? One can only guess.