Writing and taxes

by

Talking about tax policy using yourself as an example is a very slippery slope. Greg Mankiw is one economist who enjoys the challenge of navigating such slopes and usually he does so without incident. But not this weekend after his NYT column. He considered his own decision to write a column based on a $1,000 fee and, for him, showed that if he were motivated by the money, much of his long-term return would disappear — not because of the taxes per se but because he had intended to save and bequest the additional income. That is, what he was losing was seemingly not going into the Government’s pockets.

Now I must admit that I read this on its face as a calculation about how to think about marginal rates of taxation. My reaction (and there are many one could have) was that it was strange not to consider the notion that comparing the world with and without the tax would surely be comparing the world without and with additional public debt that someone in the future (perhaps his children) would have to pay. That is, what happened to Ricardian equivalence and when calculating a bequest you have to consider personal or direct bequest and indirect ones that come through less debt. But I guess a NYT column has limited space to get into that.

The broader reaction at the weekend was not about such issues. It was about sniping about whether money should matter if you are writing opinion pieces and the like. Greg Mankiw responded as such. But I wonder: is it better for us that someone is motivated by money or by other means when considering whether to write articles? If you have non-monetary motives, I can tell you what you get paid for opinion pieces when you do it for fun is nothing. In that case, you do it but there is no money going to children or government. Instead, if you have monetary motives, you’ll negotiate some payment. Then there is tax revenue for the government.

So do we want Greg Mankiw to be motivated by money in writing articles? I think we do. His marginal tax rate is clearly much higher than the NYT’s company tax rate and perhaps the average (marginal) tax rate of NYT shareholders. That means that a money-motivated Mankiw will generate more tax revenue (for the rest of us) than a self-motivated Mankiw, who avoids taxes by being relaxed about payment, does.

3 Responses to "Writing and taxes"
  1. As an aside to Mankiw’s point, the short-run marginal tax rate on (some) low income earners in Australia is almost as high as Mankiw’s long run marginal rate.
    When I was an undergrad, my income placed me into the 15% marginal tax bracket. In addition, for each extra dollar I earnt I lost 70 cents of my Centrelink Youth Allowance payment. That’s a marginal tax rate of 85%.

  2. “His marginal tax rate is clearly much higher than the NYT’s company tax rate and perhaps the average (marginal) tax rate of NYT shareholders.”
    The Federal corporation tax and top rate income tax are equal at 35%. Mankiw will also pay MA income tax of about 6%. But you need to add the 15% rate on qualified dividends or higher long-run capital gains rate + state income taxes paid by shareholders on top of the corporate rate because the US doesn’t have a franking credit system like Australia. That’s assuming that the NYT makes any profit anytime 🙂

%d bloggers like this:
PageLines