Survey college students and ask them. And then follow up with the same question and replace the term “college” with “any other corporation” and tell me their response. Of course, what matters are underlying relative demand and supply elasticities. But I don’t suspect the lay person has any such model in mind when dealing with this question, hence my assertion that you can’t have it both ways if you don’t have a model.

But my bigger beef is that all this discussion of “optimal” tax theory never actually gets to the point of what “optimal” really means. Of course, people like me don’t matter, but if you are like me and are morally opposed to most forms of taxation, it is nowhere near “optimal” to tax people marginally at 48%. Those values don’t matter I suppose, and they certainly are not included in the marginal utility assumptions mentioned above. But who cares about my ethical values? What else this discussion misses is that “optimal” in the sense of what the top tax rate should be doesn’t say anything about the “cheapest” way to raise a particular amount of tax revenues, or even the “fairest” way. For example, a head tax of $15,000 per year levied on every single American would raise enough revenue to fund government, and would eliminate well over $2 trillion of waste every single year from scrapping the current tax code (one day I’ll show you where that $2 trillion comes from – it is a conservative estimate in my view). But this is most certainly NOT what the academic “debate” on optimal taxation has been about. Keep your eye on the ball – no one here is trying to get a fair and efficient (in the sense of least distortions) tax code out of this discussion.

Finally, as I’ve said before, it’s not even clear to me that we want an “optimal” rate of taxation on income – but that’s neither here nor there these days.

What changes here isn’t the solvency of the trust fund. What changes is where the money comes from. Payroll taxes mainly come from the middle and working classes. The general fund is supported by income taxes, which mainly come from the well-off and the rich. So, generally speaking, a payroll tax cut that’s compensated for by transfers from the general fund reduces the taxes of the middle and working classes and raises the taxes of the well-off and the rich.

Oh, wait, that’s from Mother Jones.

But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model.  This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity.  Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed.

Big surprise there. Let me remind folks – if you want to criticize market enthusiasts for arguing that social optimality of market outcomes is everything, then remind me why that same argument shouldn’t be applied here?

I call it the 6-6-6 plan — an across-the-board 6 percent national sales tax (on top of any existing state and local sales taxes) in effect from 6 p.m. on Thanksgiving to 6 a.m. on Black Friday.

This plan would leave both stores and consumers free to decide for themselves whether middle-of-the-night shopping is worth it. Even if some retailers decided to stick with the early openings and even if some shoppers showed up, the country would reap a significant benefit. As every mature adult realizes, we have to tax something, and the revenue from my 6-6-6 plan would make it possible to reduce taxes on other activities that are actually useful. Best of all, it would encourage Americans to spend Thanksgiving night where they really want to — in bed.

Longtime readers will know that Professor Frank is probably the only economics professor I have ever had that has left a real mark on me, but that doesn’t mean he gets a free pass. Other writers have already much discussed the irony above that a “tax increases choice” … what I’d like to point out simply is that in much of Frank’s writings (such as this one) a major concern is that lots of spending by the rich is wasteful and that very steep consumption taxes would improve welfare since those taxes could be funneled toward the non-rich. Now of course think hard about who the typical Black Friday shopper is? Is it Daddy Warbucks in his bunny slippers just hoping to get that one extra great deal on a new toaster? So now Professor Frank finds himself in the position of wanting steep consumption taxes on the rich (we’ve written lots on this in the past) and wants to tell the non-rich exactly how and when to shop. And of course this is all done in the name of … liberty.

Let’s suppose we are willing to accept this newest of Professor Frank’s proposals. Do we think that there will be no incentive to create a substitute for Black Friday? Would Professor Frank want to ban all efforts to price discriminate in favor of this class of consumers? So much more to say … but I want to spend some time checking out what deals there might be in store for me on Cyber Monday. Would the dear professor like to see that activity taxed too? I’ll be buying lots of books tomorrow, in case anyone is wondering.

UPDATE: I should be clear. I know what Professor Frank would say in response. In the article he says that taxes have to come from somewhere, so they might as well come from Black Friday sort of things. And I am sure he is able to articulate something like this – I truly would be better off if the entire internet were banned on Saturdays. On the tax point – I am sure Professor Frank is a mature adult – sort of like he claims only some opponents of this idea are — and will recognize that we rarely get rid of bad taxes in favor of better ones – we just pile on the bad ones on top of one another. Maybe if the world were populated with more “mature adults” then we’d need neither the 6-6-6 plan nor need to replace bad taxes with good ones. What was that we hear about reality?

UPDATE #2: By the way, don’t some bars stay open every night until 4am … in an arms racy sort of way?

But whatever we do, don’t ever fall for the complaint that corporate tax rates in the U.S. are high. They aren’t.

In fairness to Drum, he mentions the point I am going to make vaguely in the paragraph above my citation, but then why end with that particular citation? It is one thing to say that, at the margin, corporations must pay 35% of its additional income out as taxes versus what Drum does – which basically adds up all of the taxes paid by corporations in America, then divides by all of their income, and points to average taxes paid as an indicator of distortions or burdens from taxes.

Which is, of course, completely wrong. If my marginal tax rate on income over $60,000 was 100%, and zero on income below $60,000, I am pretty sure I’d work for a salary of around $60,000 and then pay zero taxes. Would you conclude from the fact that the average taxes paid by Wintercow were zero that the tax burden from Wintercow was not as awful as some right wing zealot claimed it to be?