{
    "href": "/post/2012/10/15/counterintuitive-but-interesting-high-taxes-spent-wisely-reduce-employment/",
    "relId": "2012/10/15/counterintuitive-but-interesting-high-taxes-spent-wisely-reduce-employment",
    "title": "Counterintuitive But Interesting: High Taxes, Spent Wisely, Reduce Employment?",
    "author": "pmjones",
    "markup": "html",
    "tags": [
        {
            "href": "/tag/economics/",
            "relId": "economics",
            "title": "Economics",
            "author": null,
            "created": null,
            "updated": [],
            "markup": "markdown"
        },
        {
            "href": "/tag/government/",
            "relId": "government",
            "title": "Government",
            "author": null,
            "created": null,
            "updated": [],
            "markup": "markdown"
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        {
            "href": "/tag/taxes/",
            "relId": "taxes",
            "title": "Taxes",
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    "created": "2012-10-16 01:50:28 UTC",
    "updated": [
        "2012-10-16 01:50:28 UTC"
    ],
    "html": "<blockquote>\n<p>If the government raises the tax rate on you and all of your friends, and then divides up all the tax revenue and dumps it from a helicopter, what do you get? \u00c2\u00a0Well, none of the money gets wasted, so the tax hike doesn't have a direct income effect (there's a small indirect one I'll ignore here).\u00c2\u00a0</p>\n<p>If the tax hike is used for pure redistribution from the \"average person\" back to the \"average person,\" then the tax hike doesn't make the \"average person\" poorer: The government is taking money out of everyone's right pocket and slipping it into their left. \u00c2\u00a0</p>\n<p>But if the income effect is gone, what's left? \u00c2\u00a0The disincentive to work: The pure substitution effect.\u00c2\u00a0</p>\n<p>So here's Prescott's Big Idea:\u00c2\u00a0</p>\n<p><strong>If higher taxes are wasted, then a tax hike has a small, ambiguous effect on employment.</strong></p>\n<p><strong>If higher taxes are spent wisely, then a tax hike causes a big fall in employment.</strong></p>\n<p>Not quite what you expected, was it? \u00c2\u00a0</p>\n</blockquote>\n<p>I wonder if it's true. (Emphasis in original.) Via <em><a href=\"http://econlog.econlib.org/archives/2012/10/prescott_hoisti.html\">Tax Rates, Efficient Government, and Jobs: Prescott's Surprise, Garett Jones | EconLog | Library of Economics and Liberty</a></em>.</p>\n"
}