Taxes on the Wealthy and Growth

Do taxes on the wealthy reduce economic growth?  That is the typical Republican talking point (via Michael Linden) 

Speaker John Boehner (R-OH): “What some are suggesting is that we take this money from people who would invest in our economy and create jobs and give it to the government. The fact is you can't tax the very people that we expect to invest in the economy and create jobs.”
Former Massachusetts Gov. Mitt Romney: “With over 20 million people who are unemployed or who have stopped looking for work, the last thing we should be doing is raising taxes on job-creators, entrepreneurs, and small business owners across America.”
John Boehner, again: “A tax hike would wreak havoc not only on our economy’s ability to create private-sector jobs, but also on our ability to tackle the national debt.”

 Perhaps they are right, but the historical record seems to indicate that other factors are more important:

 What about the impact of elite's tax rates on economic growth?  Most Republicans believe that cutting taxes on the wealthy will boost growth (via Michael Linden)  :

Speaker John Boehner: "We've seen over the last 30 years that lower marginal tax rates have led to a growing economy, more employment and more people paying taxes.”
Sen. Jim DeMint: "But we also need to just cut the top marginal rate for individuals and corporations so that we're more competitive and companies can look way out in the future and know they'll have a competitive tax rate.”
Club for Growth: “To stimulate GDP growth, a tax cut has to cut the marginal tax rates upon which the decision makers in the economy base their decisions to work and, above all, to invest.”

Again, the effects cannot be the most important thing:

“The High Cost of Free Parking.”

Tyler Cowen:

IN our society, cars receive considerable attention and study... But we haven’t devoted nearly enough thought to how cars are usually deployed — namely, by sitting in parking spaces.
Is this a serious economic issue? In fact, it’s a classic tale of how subsidies, use restrictions, and price controls can steer an economy in wrong directions. Car owners may not want to hear this, but we have way too much free parking.
Higher charges for parking spaces would limit our trips by car. That would cut emissions, alleviate congestion and, as a side effect, improve land use. Donald C. Shoup, professor of urban planning at the University of California, Los Angeles, has made this idea a cause, as presented in his 733-page book, “The High Cost of Free Parking.” 

That's right, a 733-page $60 book solely about parking policy!  There are two problems:
1. Governments force store owners, and real estate developers to build more parking than they want to build.  Businesspeople should be able to estimate the supply and demand for parking better than bureaucrats. This causes surplus parking and wasted resources.
2.  Governments provide Soviet-style parking at great taxpayer expense (or via expensive regulations) and price it too low which causes parking shortages and wasted resources looking for cheap, subsidized parking. 

The subsidies are largely invisible to drivers who park their cars — and thus free or cheap parking spaces feel like natural outcomes of the market, or perhaps even an entitlement. Yet the law is allocating this land rather than letting market prices adjudicate whether we need more parking, and whether that parking should be free. We end up overusing land for cars — and overusing cars too. You don’t have to hate sprawl, or automobiles, to want to stop subsidizing that way of life.
As Professor Shoup wrote, “Minimum parking requirements act like a fertility drug for cars.”
Under a more sensible policy, a parking space that is currently free could cost at least $100 a month — and maybe much more — in many American cities and suburbs. At the bottom end of that estimate, if a commuter drives to work 20 days a month, current parking policy offers a subsidy of $5 a day — which is more than the gas and wear-and-tear costs of many round-trip commutes. In essence, the parking subsidy outweighs many of the other costs of driving, including the gasoline tax.
In densely populated cities like New York, people are accustomed to paying high prices for parking, which has helped to encourage a relatively efficient, high-density use of space. Yet even New York is reluctant to enact the full social cost of the automobile into policy. Proposals to impose congestion fees have failed politically, and on-street parking is priced artificially low.
Manhattan streets are full of cars cruising around, looking for cheaper on-street parking, rather than pulling into a lot. The waste includes drivers’ lost time and the costs of running those engines. ...
Many parking spaces are extremely valuable, even if that’s not reflected in current market prices. In fact, Professor Shoup estimates that many American parking spaces have a higher economic value than the cars sitting in them. For instance, after including construction and land costs, he measures the value of a Los Angeles parking space at over $31,000 — much more than the worth of many cars, especially when considering their rapid depreciation. If we don’t give away cars, why give away parking spaces?
Yet 99 percent of all automobile trips in the United States end in a free parking space, rather than a parking space with a market price. In his book, Professor Shoup estimated that the value of the free-parking subsidy to cars was at least $127 billion in 2002, and possibly much more. ...As Professor Shoup puts it: “Who pays for free parking? Everyone but the motorist.”

 LA Times talks about how LA's fabulous Disney Concert Hall set its busy concert schedule:

Anyone scanning Disney Hall’s debut calendar in the fall of 2003 would have noticed the size of that first season’s schedule, 128 shows in all. That’s a weighty number for a new hall—one might have assumed it was chosen by venue management wanting the gravitas of a world-class chamber’s arrival or perhaps seeking a broad spectrum of music that could reflect the diverse city. Those guesses would have been wrong. Disney Hall had been built atop Parcel K, a county-owned square of land... Yet before an auditorium could be raised on K, a six-floor subterranean garage capable of holding 2,188 cars needed to be sunk below it at a cost of $110 million—money raised from county bonds. Parking spaces can be amazingly expensive to fabricate. In aboveground structures they cost as much as $40,000 apiece. Belowground, all that excavating and shoring may run a developer $140,000 per space. The debt on Disney Hall’s garage would have to be paid off for decades to come, and as it turned out, a minimum schedule of 128 annual shows would be enough to cover the bill. The figure “128” was even written into the L.A. Philharmonic’s lease. In 2003, Esa-Pekka Salonen opened Frank Gehry’s masterpiece to a packed house with Mahler’s Resurrection, and in the years since, concertgoers—who lay out $9 to enter the garage—have steadily funded performances that exist to cover the true price of their parking.  ...“L.A.,” says Shoup, “required 50 times more parking under Disney Hall than San Francisco would allow at their own hall.” Downtown already had an oversupply of garages and lots where music fans could leave their cars. “After a concert in San Francisco,” says Shoup, “the streets are full of people walking to their cars, eating in restaurants, stopping into bars and bookstores. In L.A.? The bar next door at Patina is a ghost town.” Receipts that should have gone to the philharmonic’s endowment instead are funding enough parking for nearly every ticket holder to park a car every night downtown. 

What environmental reasons justify sacrifice?

I can only think of four fundamental environmental rationales off hand.  Email or leave a comment if you think of more.  

1. Global warming 
1. This really just duplicates the following reasons, but is potentially so important that it deserves its own category.
2. Reduce resource extraction to preserve nonrenewables for future generations? 
3. Reduce toxic pollution (poisons by ingestion or breathing)? 
4. Wellbeing of other species?

People like tax expenditures much better than explicit expenditures

The Monkey Cage:

We presented survey respondents with a description of a federal housing program, after which they were asked to rate their approval of the program on a seven-point scale.  About half of respondents received a description of the real-life Home Mortgage Interest Deduction:
“We’re going to ask you your opinion on a government program intended to help Americans afford to own homes. Under this program, individuals who take out a mortgage to buy a home are eligible to deduct the monthly mortgage interest from their taxable income, thereby reducing their tax burden. The total savings for individuals under this program are estimated to be $94 billion for fiscal year 2011.”
The other half of the respondents were shown a description that differed in two respects: first, the words “eligible to deduct the monthly mortgage interest from their taxable income, thereby reducing their tax burden” were replaced with “eligible for a grant from the federal government to help them afford the monthly payment;” second, the words “The total savings for individuals under this program…” are replaced with “The total government expenditures to individuals under this program…” We believe these contrasts in language were reasonable given the way these types of programs are often framed by elites. 
The effect of this manipulation of delivery mechanism is displayed in this bar graph, which displays the percentage of respondents in each treatment group who expressed at least some approval of the program.  The effect is considerable, as support drops by about 24% when the program is described as a grant.

The effect of this manipulation was especially pronounced for conservatives.  Conservatives appear to be just as willing as liberals to support a government program, provided that it is delivered through the tax code, but less willing to support this program when described as a “grant.”

Why the preference?  The authors hypothesize that it is partly due to "a lack of understanding about ... tax expenditures"  or " perhaps it’s about the beneficiaries; Americans may look more generously upon “taxpayers” than they do upon other potential recipients of policy benefits."

Age Dependent Taxation

Horizontal or vertical equity?  Matthew Weinzierl:

age-dependent taxes... the idea of making the tax rate contingent upon the age of the tax payer. ...the administratively simple reform of age dependence can make the tax system substantially more efficient and more equitable...:

• Age-dependent marginal tax rates are tailored to the distribution of income at each age. To see why, note that a 25-year-old earning $100,000 is higher in his or her age-specific income distribution than is a 45-year-old earning $100,000. Furthermore, these two workers are likely to have a different lifetime earnings path. We therefore ought to tax them differently.
• Age-dependent average tax rates can help individuals transfer earnings across the lifecycle when private borrowing and saving is restricted.
• Age dependence yields a large welfare gain by reducing distortions (lower marginal tax rates) and by making possible more redistribution.

See working paper (PDF)

When Privitization INCREASES Expenses!

Good Magazine highlights a new POGO study which finds that government outsourcing often increases costs rather than decreasing them. 

A new study by the Project On Government Oversight revealed that contractors earn 1.83 times more than public employees, and more than twice the compensation paid in the private sector for comparable services.
While the federal workforce has remained steady at about 2 million people since 1999, the contractor workforce increased from 4.4 million to 7.6 million in 2005, costing approximately $320 billion a year. In 33 of 35 occupational classifications, paying government employees would be cheaper than hiring a contractor.
POGO points to two main reasons for the huge waste. One is the steady drumbeat of small- and anti-government rhetoric from the right, which has resulted in the creation of a “shadow government” in which contractors perform services once handled by public employees at far greater cost—which, ironically enough, increases the size of the federal budget.
The second reason is that the government is ill-prepared to negotiate market-rate fees because it does not manage data about payments and processing or maintain clear standards about occupational specialties and justifying outsourcing. There’s also the issue of no-bid contracts and other shady paths for companies to find lucrative arrangements working for the government.

Intellectual Property

 Yglesias:

I think the right way to think about striking this balance is in terms of the capital-intensity of what you’re talking about. If you’re talking about a very capital-intensive field, then you won’t have any new products unless there are large financial incentives to innovate. But if you’re talking about a field with low needs for capital inputs, then creating the large incentives is less important and strong IP rights are mostly acting as an obstacle to innovation. The rise of digital technology has made it much cheaper than it was before to produce and distribute most kinds of media. The correct policy response is to adopt somewhat weaker intellectual property rights. Instead, we’ve moved in the opposite direction to shore up firms threatened by potentially disruptive technological change. It’s a mistake.

 I don't think "capital-intensity" is the right term.  It is large size of investment that requires large financial incentives.  In most areas the cost of innovation has declined, but I'm not sure it has declined in drugs.  The cost of drug discovery may be down, but the cost of drug development and testing has suffered from Baumol's cost disease as well it should.  50 years ago, Americans were less concerned about the potential harms from drugs than we are today.  Heck, the Tuskegee syphilis experiment only ended in 1972 which shows how little regard the medical establishment had for the safety of human experimental subjects at that time.  That led to major medical experimentation regulation.