Mike Konczal, one of my favorite left-of-center bloggers, writes:

His strong background is in tax policy. As Arpit Gupta pointed out to me, some of his most interesting research has been quantifying and using statistics to argue that there isn’t much deadweight loss from taxing the rich. That the arguments the right use about how the richest 3% of Americans will all go live in a gulch somewhere if their slice of the Bush tax cuts expire doesn’t hold much econometric merit.
For example, see: Evidence on the High-Income Laffer Curve From Six Decades of Tax Reform (“The evidence from both aggregate cross-sectional data on tax returns and panel data on executive compensation indicates that the responsiveness of high-income people seems to be relatively modest in almost all time periods except the 1980s.”) and What Happens When You Tax The Rich? Evidence From Executive Compensation (“Breaking out the tax responsiveness of different types of compensation shows that the large short-run responses come almost entirely from a large increase in the exercise of stock options by the highest income executives in anticipation of the rate increases. Executives without stock options, executives with relatively lower incomes, and more conventional forms of taxable compensation such as salary and bonus show little responsiveness to tax changes.”)
We are currently at a point where Republicans and some Democrats are deciding that the most important thing our country needs right now is to help enrich the top 3% of Americans by extending the Bush tax cuts. (As far as stimulus goes, extending those tax cuts on the rich would be somewhere way below a “dig holes, fill holes” project in effectiveness because of the low propensity to consume of the rich.)
So it’s very good to have a CEA Chair who has detailed statistical work saying that the Laffer-style arguments those on the right will be breaking out simply don’t carry much weight. This is far more important than whether or not he wins or loses on R&D tax credits. Godspeed Goolsbee! Stand firm. [Emphasis added.]

There has, however, been detailed statistical work published on this subject since 1999 that suggests that Goolsbee’s research might have missed important aspects of the marginal tax rate story, a subject Arpit Gupta has addressed. It’s not obvious that standing firm on evidence gathered in the mid-1990s when new evidence and research may have superseded those findings it is a wise course of action.

In that last paragraph, Mike seems to be employing a preemptive argument: don’t listen to these Laffer-style arguments because they don’t carry much weight. But this raises the question of what we should do if these Laffer-style arguments rely on evidence gathered after 1999, including by economists with left-of-center allegiances? I can’t speak to Raj Chetty’s politics, but I do know that Mike has linked favorably to his work on unemployment insurance and David Leonhardt has enthusiastically cited his work on superstar teachers. I have no reason to believe that Chetty is an inflexible right-wing ideologue. Rather, he seems, as in this interview with our friend Dylan Matthews, to be a careful, methodical scholar who is reluctant to draw overly broad policy conclusions from his work.

So while I’m sure Chetty wouldn’t endorse any policy prescriptions based on his tax research, it’s not clear to me that Mike is right to embrace this preemptive strategy.

To be sure, and here I am actually emphasizing myself in bold, we don’t have very good follow-up research that tracks high earners as Goolsbee did in his study. Chetty’s work covers much broader terrain. But it seems reasonable to think that executives would also adjust their work effort in response to new disincentives, e.g., by retiring earlier than they might otherwise. Goolsbee writes:

For no group, however, could it be harder to estimate such a parameter than for high income people. There is little direct evidence on the rich and their money. Every major publicly available data source has at least one flaw that limits its capacity to identify the tax responsiveness of therich. Top-coded income variables, small numbers of observations at the high end, a lack of panel data on the same individuals over time, and the limits of the information reported on a tax returnare only some of the problems commonly encountered. These problems have made analysis difficult and results ambiguous.

Goolsbee devises a good strategy for tackling this problem, i.e., he used panel data tracking compensation for thousands of business executive from 1991 to 1995:

Disaggregating the compensation data by form verifies that timing shifts predominate. Almostall of the responsiveness is due to changes in the exercising of stock options by the very highest income executives. Indeed, executives without stock options, even those with quite highincomes, responded little to tax rates. Other forms of taxable income such as salary and bonusshow little responsiveness. Some evidence indicates that nontaxable forms of income rise withmarginal tax rates but the small size of this category implies that it cannot explain the short-runresponse to taxation.

It should go without saying, however, that much has changed at the very top of the income distribution since 1995. The limitations of Goolsbee’s approach should be obvious, e.g., it wouldn’t offer a reliable guide as to whether more high earners take early retirement, etc. The research of Chetty et al. strikes me as at least equally salient.

As I’ve written in this space, I do not support extending the Bush tax cuts. Rather, I support comprehensive tax reform. But I do believe that those of us who want to raise revenue in the least economically harmful way have reason to be concerned about high marginal tax rates, regardless of our political coloration.

The Swiss tax system, for example, includes a modest net wealth tax, yet effective marginal tax rates tend to be lower than in the United States. Effective marginal tax rates vary across cantons and communes, just as effective marginal tax rates vary across states and cities in the U.S. The maximum federal income tax rate in Switzerland is 11.5 percent. If this strikes you as low, it’s because Switzerland raises more revenue at the cantonal and communal level and because the country has a VAT. There’s a strong case to be made that Switzerland’s mix of low marginal tax rates, net wealth taxes, and heavier reliance on consumption taxes has led to a better outcome from all Swiss citizens, including those at the bottom of the income distribution. I might not find a modest net wealth tax ideologically congenial, but I can certainly see how it would be a better choice for addressing wealth concentration than high marginal tax rates, for the reasons Alan Viard has outlined, among many others.