In praise of wasteful spending

Steven E. Landsburg

Economics Letters, 2014, vol. 124, issue 3, 449-451

Abstract: In the presence of distortionary taxation, the destruction of wealth–either by an act of government or an act of God–can be welfare improving, because it increases the supply of labor and therefore (holding government spending constant) allows distortionary taxes to be lowered. We show that under reasonable assumptions, there must be tax rates at which this effect occurs.

Keywords: Optimal taxation; Welfare; Fiscal policy (search for similar items in EconPapers)
JEL-codes: D6 H2 H3 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:124:y:2014:i:3:p:449-451

DOI: 10.1016/j.econlet.2014.05.023

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