10/24/2004 04:40:33 PM|||Nathan Moore|||

Edward Prescott, chief monetary advisor to the regional Federal Reserve Bank of Minneapolis and Nobel Prize Winner, has a fantastic article on the wisdom of lower, permanent, tax rates. The gist

The important thing to remember is that the labor supply is not fixed. People, be they European or American, respond to taxes on their income. Just one more example: In 1998, Spain flattened its tax rates in similar fashion to the U.S. rate cuts of 1986, and the Spanish labor supply increased by 12%. In addition, Spanish tax revenues also increased by a few percent.

He also links to his more detailed paper on the subject here. For those of you who are economically minded (and at some level, aren't we all) it's worth taking a look.

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