Becker/Posner remembering Milton Friedman

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Comments

[Steve Conover Jr.]

I liked Posner's comment:
http://www.becker-posner-blog.com/archives/2006/11/milton_friedman.html

Good for those of us (probably most) influenced by Hayek...some interesting challenges to a couple of the core principles Friedman and Hayek put forward (particularly the existence and success of high-tax Scandinavian countries, which may have a couple of suboptimal statistics like higher unemployment, but are still stable, rich western democracies).

[Alan]

What Sweden demonstrates, in my view, is that flat taxes raise more money than progressive tax rates without totally crippling the economy. At the national level, Sweden has two tax rates of 20 and 25% on labor, but a flat 30% tax on investment income and flat municpal taxes of 29-37% regardless of income. Then there is a flat 40% payroll tax and a flat 35% VAT. Sweden doesn't use the tax system to redistribute income. They just use taxes to reduce income. But their income statistics look pretty good -- before taxes.

[Steve Conover, Jr.]

I guess I'm more interested in Posner's idea that Friedman was to some degree disproved by the facts (though I'd argue Hayek was not - I don't remember him saying high tax rates were the Road to Serfdom. In fact I think he was in favor of a national healthcare system). Tax policy alone has never taken a previously rich country (that I can think of) with a solid middle class and made it destitute in an Atlas Shrugged sort of way. Optimizing tax policy seems to help around the margins but it seems like there are other influences - the level of education, some right to private property, size of the middle class and the level of burden of regulation being a few examples - that make a bigger difference.

I would be a lot more open to the argument that incrementally restricting Bill-of-Rights sorts of rights can lead to poverty. I think there's a lot more support for that argument when you look at cases where economies really have been gutted.