Monday, January 21, 2013

Endogenous Effort and Rising Taxes: The Case of Golf's Phil Mickelson

According to the NY Times,  Golf's Phil Mickelson represents a "Laffer Curve" data point.  Anticipating that his marginal tax rate is about to rise, he claims he will play less golf and substitute to leisure.  While he is just one man, does this portend any deeper consequences?  If we sat down and talked honestly with everyone in Silicon Valley, how many of these men and women will reduce their innovation efforts given the new marginal tax rates?  Who is at the margin?  Does the existence of such people (those whose effort will decline because of the new incentives) suggest that overall growth will slow as an unintended consequence of the new tax policies?   Are there macro growth effects of large progressive changes to the tax code?