Professor Mankiw of Harvard wrote a while back about the marginal tax rate he faces and its impact on his decisions on how to allocate his time. Now he's linked to an article about Keith Richards, who seems to have been a famous rock singer back in the day (my familiarity ends with Elvis) who claims his group moves from country to country in order to minimize their taxes. Ezra Klein comments on it here.
It seems to me neither Mankiw's original piece nor this example is on point. The classical theory is that the rich, faced with high marginal tax rates, will stop working so hard thereby decreasing the total wealth of the economy.
But in the case of Mr. Richards, there seems no indication that he and his group reduced their output of songs nor were they deterred by the confiscatory British tax rates back in the 1960's. At most, they've expended effort to travel to take advantage of the lowest available rates. That might be an argument for standardizing tax rates from nation to nation.
In the case of Mr. Mankiw, he seemed to say he was being dissuaded from giving more paid speeches, presumably spending his time on the research and teaching for which he's receiving a salary from Harvard.
I'd think the high tax rates might have more impact on people who are choosing their occupations--high tax rates might discourage choosing hedge fund operation and encourage teaching math in high school. That's not a bad trade, IMHO. Or, as it did in the case of Britain in the 1960's and 70's, it could change the location in which work is pursued. For the minority of people who really find their satisfaction in life from their work, certainly including Prof. Mankiw and Mr. Richards, I remain unconvinced their output is being much reduced by the disincentive of high tax rates.
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