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05-Aug-2017 09:54

I can also imagine a world where a wise economist comes to town.

She says “Alice’s work is the most important thing in this town, but taxing Bob destroys wealth for no reason.

One could argue that poor people are better off with billion in actual money than billion in government programs purporting to help them.

But although I agree there’s a multiplier, I don’t know if it’s this big.

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Half of the budget is entitlement programs, and 32% of those go to the poorest quintile, so they would get an extra billion. But it’s hard to come up with remotely plausible numbers in which the poor and working-class are better off with the tax bill than without it.

I can imagine a world in which Bob’s curse was stronger, and every dollar Bob was taxed destroyed a million dollars in value, and soon any tax on Bob meant the citizens of the town were starving to death and all of them including Alice went bankrupt.

But right now the tax on Bob isn’t big enough to be worse for Alice than a tax on Alice, and since Alice is the only important person in this situation, I don’t care.

I think the assumptions I plugged in were overly generous: the bill won’t really increase growth 1%, and although poor people have 3% of income they get much less than 3% of economic gains.

Still, even under these generous assumptions, this bill gives poor people less money than the default case of not doing it.

And government programs would also disproportionately help the poorest of the poor, compared to economic gains which would disproportionately help the richest of the poor.



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