And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
I clicked the link and read the whole Mankiw post to see if there was some specific controversy over public policy to which this parable was supposed to speak, but there isn’t.
This, to my mind, is this most annoying tick of right-of-center economic punditry — the tendency to produce arguments in favor of some form of liberal democratic capitalism and then brandish them as argments in favor of the specific policy proposals favored by those who want to take the most laissez faire of liberal democracies and take it even further in an extreme direction. Maybe I’m wrong, but I don’t think liberals do the reverse. I don’t think that if I constructed a witty anecdote proving that the government needs to have more than zero revenue that, say, Kevin Drum would hail this as a brilliant aperçu rather than something oddly banal to be blogging about. Naturally, one can, in principle, go too far in terms of soaking the rich (a specific example of doing so I would cite is the policy environment in Sweden) but what does this have to do with anything? Would a return to the level of taxation prevailing in 1999 or even 1994 really lead to dramatic economic collapse with Bill Gates fleeing to Andorra to take refuge?