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?

1 comment :

B.L. Wolfe said...

I would say "no". Phil Mickelson's net worth is estimated to be between $150 and $180 million. Clearly he is not golfing for the money at this point. For people at the top of their industry or sport, earning is not about purchasing power (how much stuff can you buy?) but about ego and status. If all the top earners are taxed at the same rate, they still have a level playing field to measure their contracts and winnings against their rivals.