Here’s Miles Kimball:
In calling myself a liberal, I am saying that in addition to an attachment to the liberty, limited government, constitutionalism, and rule of law emphasized by Classical Liberalism, I hold to a view based on both classic Utilitarianism and contested elements of modern economic theory that, generally speaking, a dollar is much more valuable to a poor person than to a rich person, and that therefore, there is a serious benefit to redistribution that must be weighed against the serious distortions caused by the usual methods of redistribution.
It’s very unusual to come across someone with almost identical political views. How rare? Kimball continues:
Perhaps because of cognitive dissonance, it is common for people to either believe (a) that tax distortions are serious and redistribution of questionable value OR (b) redistribution is valuable and the distortions induced by taxes are small. My belief is that (c) tax distortions are serious AND redistribution is valuable. That makes me a supply-side liberal.
I also agree with this:
Tax distortions are governed in important measure by the the consumption-constant elasticity of labor supply. The consumption-constant elasticity of labor supply measures how much less workers want to work when what they earn is taxed, but the tax revenue is recycled back to them in one form or another of government benefit they can get regardless of how little they work. Matthew Shapiro and I argue in our paper “Labor Supply: Are the Income and Substitution Effects Both Large or Both Small?” that the consumption-constant elasticity of labor supply is large.
Karl Smith doesn’t seem to buy the consumption-constant elasticity assumption. But it seems the most reasonable baseline to me. In public finance the big debate is over the long run effect of expanding both taxes and expenditures. Are higher taxes justified? If they are recycled back to the public in some form of benefit, they might be. But only if they overcome the efficiency cost of lower output. It’s true that measured GDP might not fall if the money is wasted (as poorer people tend to work harder.) But that’s not much of an argument for big government. In addition, in recent decades the growth in government seems to be coming more in the form of social welfare expenditure, not programs like defense and space exploration. I’d expect that trend to continue.
Put simply, there is a choice between the European model of high taxes and low work effort, the US/Japanese model of medium taxes and medium work effort, and the Singapore model of low taxes and high work effort.
Now if only he were a NGDPLT proponent . . .