Greg Mankiw is up to no good


Greg Mankiw comments on why he is not interested in heading the NBER:

Why did I decide not to pursue the job? As in many such decisions in life, various factors were at play, both personal and professional. But what really pushed me over the edge was pending tax policy. With the Bush tax cuts set to expire in a couple years, I am looking for ways to reduce my taxable income.

He also quotes a paper by Martin Feldstein, the outgoing NBER head, which sheds light on what Greg intends to do:

A change in individuals' marginal income tax rates can induce them to alter their taxable income in a wide variety of ways, including:

1. changes in labor supply,
2. in the form in which employee compensation is taken,
3. in portfolio investments,
4. in itemized deductions and other expenditures that reduce taxable income, and
5. in taxpayer compliance.

If my interpretation of Greg's statement is correct, the driving force behind his decision is not to increase the amount of leisure he consumes: he doesn't want to substitute some leisure for income, he is looking to reduce his taxable income. So 1 is out.

3 is also out, as it is not a labour market response and it is independent from his decision to take the NBER job. Four is largely independent of labour market decisions as well. This leaves us with 2 and 5, and 2 is in most cases nothing other than a soft version of 5.

So Greg's plan is to invest more resources in cheating the taxman, which is at best morally ambivalent and at worst outright illegal.

Furthermore, it is notesworthy how he takes this opportunity to make a political statement. He could have just said 'the NBER job does not pay enough'.



by datacharmer | Thursday, January 31, 2008
  , , | | Greg Mankiw is up to no good @bluematterblogtwitter

4 comments:

  1. Bertil Says:

    It was obvious to me that Greg was referring to taking a position as an international civil servant. A recent conversation with a friend considering the same options might have helped.

    Or move to a less red-tape prone country.

  2. Tim Worstall Says:

    There's one other possibility.
    A sighting of that incredibly rare beast, American irony.

  3. Shane Says:

    A Mankiw joke is usually hard to spot, and often lame when you do have it figured.

    Surely you can't be trying to imitate , DC?

  4. Anonymous Says:

     

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