Wednesday, April 25, 2012

Is this really the basic lesson of economics?

Frances Woolley:
The basic lesson of economics is that people - including governments - aren't stupid. If it was possible to generate an immediate increase in tax revenues by reducing tax rates, taxes would be cut instantly. Taxes are what they are in part because reducing taxes creates an immediate revenue short-fall.
But it is worth noting that countries don't immediately do a "race to the bottom" on tax rates and so there has to be some underlying level of support for current policies.  It is not that change is never good, but it is the case that it pays to carefully examine the full set of incentives.

Somebody is usually benefiting from social arrangements.  

1 comment:

  1. "Somebody is usually benefiting from social arrangements."

    Absolutely! Well put.