Dead Man Taxing for the Last Time

Greg Mankiw writes:

I am regularly struck by how bloggers so often want to pick fights with other bloggers.  Rather than giving others the benefit of the doubt, they often seem to interpret the writing of others in the worst possible light so they can then point out how foolish it is.  As an example, see

  1. This Steve Landsburg post
  2. Followed by this Brad DeLong critique
  3. And this Paul Krugman critique
  4. And Steve’s two replies.

As far as I can tell, all Steve is saying is that the true incidence of a tax is not necessarily on the person who writes the check to pay the tax bill.  He just made the point in a particularly dramatic way.  At its heart, however, his point is pretty standard and hard to argue with.

I agree completely. I take some of the blame; I should have seen that at this point in time when discussions of inequality, taxing the rich, deficits, unemployment and Keynesian economics are so prominent that any post about taxes would be perceived and interpreted in that light. In fact, Steve’s argument had nothing to do with any of these things (Stephen Williamson has a good post explaining the argument in a different way that makes this clear), instead it’s a puzzle, a thought-experiment if you will, to illustrate tax incidence theory.

The standard argument is that the legal incidence of a tax is not the same as the economic incidence. It is unfortunate to see accusations of “stupid” and “bizarre” be thrown around for what is, as Greg points out, the standard argument because it makes teaching economic arguments to the public more difficult. If Landsburg’s highly-stylized argument is bizarre, for example, then isn’t it even more bizarre to argue that in the real world the FICA tax on employers isn’t really paid by employers?


Comments for this post are closed