Well, DUH.
by Vince?Daliessio
In today's Wall Street Journal, there is an editorial actually worth reading. Edward C. Prescott, Nobel Laureate in economics, makes this observation;
Here's a startling fact: Based on labor market statistics from the Organization for Economic Cooperation and Development, Americans aged 15-64, on a per-person basis, work 50% more than the French. Comparisons between Americans and Germans or Italians are similar. What's going on here? What can possibly account for these large differences in labor supply? It turns out that the answer is not related to cultural differences or institutional factors like unemployment benefits, but that marginal tax rates explain virtually all of this difference. I admit that when I first conducted this analysis I was surprised by this finding, because I fully expected that institutional constraints are playing a bigger role. But this is not the case. (Citations and more complete data can be found in my paper, at www.minneapolisfed.org.)
This is surprising, considering the onerous overhead that employers face in Europe, but it makes sense. I hope, however, that?this doesn't lead people to believe that marginal rate cuts are somehow preferable to doing away with the income tax altogether.
