He says

I disagree on worrying less about the overall level of taxes. In my view, the low quality of the U.S. public sector reflects a complicated tangle of political economy challenges that are best addressed through spending discipline, transparency, decentralization, and incentives for improving public sector productivity. To not worry about the overall level of taxes is to cede the argument to those who want to more generously fund dysfunctional public programs that benefit incumbent providers more than the intended beneficiaries.

I want to make the point that this is an argument about government consumption not marginal taxation. In representative agent taxation models they are arguments about the term T.

I understand why in common intellectual discourse these two things get conflated, but I do want to make the point that they are not the same.

There is a point about incentives – this is one thing

There is a point about the size and influence of the state – this is another thing.

At least on some level we should recognize that they are separate even if in the day-to-day tug between liberals and conservatives they must be conflated.

 

Let me give you a real world example, though of how they might be actually come untangled.

Suppose that the government was blessed with some natural resource – say oil – that allowed huge amounts of government consumption without taxes. My point is that this would depress the productive economy.

Suppose, another government raised taxes in order to pay down a huge debt –say incurred by fighting WWII – that would not depress the real economy.

UPDATE: Both Lane Kenworthy and Reihan Salam were speaking about the overall level of taxation in a country.  This is different from the direct effects of increases in Marginal Tax Rates. For example, you could get higher taxes from eliminating tax loopholes.

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