Gregory Mankiw is an economist and a professor at Harvard University. As a conservative (unusual to find at Harvard), he has good insight into income tax rates and how they motivate, or de-motivate, economic taxpayer activity.
Yesterday he wrote an editorial in the NY Times http://tinyurl.com/26j3o3g that sets out how tax rates affect him as one of the taxpayers who make over the magical $250,000 line drawn by the Obama administration to define "rich". The interesting conclusion that Mankiw arrives at is that he can afford to pay more taxes, but that the very high share which goes to taxes (including estate tax) serves to demotivate him in terms of the effort required to earn more money. He also makes the point that all consumers will be affected by higher tax rates in terms of the limitations of goods and services supplied by the higher income taxpayers (example recording artists, medical practitioners) that are similarly demotivated.
Knowing that the income tax debate will certainly heat up after the elections with the scheduled December 1, 2010 release of the National Commission on Fiscal Responsibility, readers of this blog may well want to take a look at the Mankiw editorial.
