Wednesday, January 23, 2019

NYU Tax Policy Colloquium, week 1: Stefanie Stancheva's Taxation and Innovation in the 20th Century

Yesterday we kicked off the 24th NYU Tax Policy Colloquium, with Stefanie Stantcheva of the Harvard Economics Department presenting Taxation and Innovation in the 20th Century. Here are some of the main points that occurred to me about the paper. (I don’t comment here about the discussions, in order to preserve their off-the-record status – not that this often matters, but so that no one in attendance will ever need to worry about this question.)

1) Strong empirical results – This paper is a major success (for Stantcheva and her co-authors: Ufuk Agcigit, John Grigsby, and Tom Nicholas) because it generates strong and robust empirical findings, using new datasets that permit them to examine how state and local personal and corporate income taxes since 1920 may have affected innovation, as defined by patent quantity and “quality” (measured by citations).  They find very significant tax elasticities for innovation quantity and quality, as thus measured, that are robust across a range of different specifications.  And while a lot of what they find appears to be “business-stealing” – i.e., mere shifting of activity from one tax jurisdiction to another – they conclude that this is not the entire story; there appear also to be (lesser) effects on overall activity levels.

While the paper is science not advocacy, it strikes me as potentially important for a broader set of tax policy debates. A whole lot more would be needed to support some of the implications that I discuss below, and the authors make no claim that such support is likely to be found, but it’s nonetheless worth spelling out here why I think this line of research is of broader interest.

Other empirical results in the paper that are of interest include (a) its comparison of the effects of corporate versus personal income tax rates, and (b) its finding that agglomeration effects, such as the concentration of IP researchers in Silicon Valley, reduce the tax elasticity of the measured behaviors.

2) Contra Diamond and Saez, Ocasio-Cortez, et al? – Our era of rising high-end inequality has helped to shift the Overton window for academic debate, and perhaps even public political debate, regarding how high marginal rates at the top should be.

Optimal income taxation (OIT), a literature to which Stantcheva has (elsewhere) made significant contributions, was long thought to suggest having relatively flattish rates, for what is essentially a technical or logical reason.  OIT aims to maximize a measure of social welfare, typically based on utilitarian or other summations of individuals’ welfare, by trading off redistributive benefits (from declining marginal utility or a pro-egalitarian aggregation rule) against efficiency costs. However, the fact that rate brackets at the very top of the income distribution are inframarginal (because one is guaranteed to be above them) for so small a proportion of the people subject to them, as compared to rate brackets lower down the distribution, pushes against steep rate graduation. E.g., if I know that I will be earning $1 million or more, and the choices that I am considering relate only to the question of how much more, then rate brackets for the first $1 million of my income have no distortionary effects (i.e., only income effects) on what I decide to do.

An influential paper from several years back, by Peter Diamond and Emmanuel Saez, nonetheless used an OIT methodology to support top marginal rates as high as 70%. Their conclusion relied heavily on (1) empirical evidence of low short-term labor supply elasticity, which suggested that the deadweight loss from so high a rate at the top might not be so great, and (2) a view that any lost utility to people at the very top from the high rates would be subjectively, and/or as a matter of social welfare function weighting, indistinguishable from zero. Under the Diamond-Saez paper’s model, one therefore might choose the revenue-maximizing rate for people at the top of the income distribution. One still, however, wouldn’t want a more than revenue-maximizing rate.

An admitted problem with this conclusion was our lack of good knowledge about long-term labor supply elasticities. However, one may derive additional support for very high rates, and indeed for more than revenue-maximizing rates at the top, if one believes (as I do) that extreme high-end wealth concentration can have negative externalities, e.g., by reason of its (in the words of an NYT op-ed today by Saez and Gabriel Zucman) undermining "democracy against oligarchy” and creating “corro[sion of] the social contract.”  Under that view, extremely high wealth and income concentration at the top can be like pollution, which a Pigovian tax would price at marginal cost rather than aiming at revenue maximization.

As Paul Krugman and Matthew Yglesias, among others, have noted, this academic research underlies Alexandra Ocasio-Cortez’s recent call for a 70 percent top marginal rate, which I view as desirably expanding the Overton window for public policy debate, although I wouldn’t go all the way there myself for reasons that it would be too digressive to address here.

So, how is the Stantcheva paper on innovation’s tax sensitivity relevant to all this? The answer is that it could point the way towards a new line of argument against very high marginal rates, in particular at the top where one might expect successful IP entrepreneurs to find themselves.  The point here is not just that innovation, as measured by the paper, appears to be highly tax-responsive, but also that there are arguments for its having great social value.

3) Is “innovation” special? – In my days (back in the mid-1980s) as a Legislation Attorney at the Joint Committee on Taxation, I had a colleague whose area of responsibility included the R&D credit. He personally hated the credit (not that he could do anything about this preference), despite the fact that our economists loved it, at least in principle, because they viewed R&D activity as having positive externalities. He liked to say, in support of his view, that too much of the activity that would end up qualifying for the credit was of the character of, say, McDonald’s or Burger King working on their sesame seed buns.

But even leaving aside knowledge spillovers from businesses’ research that may be more consequential than improving the sesame seed bun, we know there is some patentable innovation that appears to have strong positive externalities. Consider iPhones, or else advances in medical treatment that prolong people’s lives and wellbeing. There is “innovation” out there that (a) creates new consumer surplus, in that the subjective value to people of a newly available item exceeds its market price, and/or (b) increases workers’ productivity, thereby permitting to reach higher levels of market consumption plus leisure than were previously available to them.

Insofar as high taxes reduce the amount of such socially valuable innovation, we have positive externalities from low rates to think about, not just the negative externalities that Saez and Zucman invoke. Thus, a finding that socially valuable innovation is reduced – not just shifted around between jurisdictions – by higher tax rates would complicate the OIT analysis and push back against the Diamond-Saez-Zucman / Ocasio-Cortez approach.

This is very far from being established by the Stantcheva paper (as Stantcheva herself would be the first to agree). But it helps to show why further research, along the lines that this paper significantly (albeit still preliminarily) advances, is of very broad interest.

One should also note the possibility of negative externalities that might be associated with innovation – e.g., if it increases high-end inequality, creates welfare losses from Schumpeterian “creative destruction,” and/or involves strategic and defensive patenting, patent trolling, etc. But in any event the paper helps to point out the need to think more about possible spillovers from “innovation,” as well as about long-term labor supply elasticities, when debating top marginal rates.

4) The paper’s quantity and quality measures of innovation – In keeping with much other IP literature, the paper uses patents as a measure of innovation quantity, and patent citations as a measure of innovation quality. This is inevitably open to challenge and imperfect, as a rich vein of IP literature has been exploring.

5) Policy implications if high tax rates reduce socially valuable innovation – Even if the paper’s possible and still speculative broader policy implications are confirmed, there is a whole lot of instrument choice to think about. E.g., lower rates vs. exempting the normal return to innovation vs. targeted subsidies for innovation vs. stronger IP protections. Each tool might have its own set of tradeoffs.

6) Fiscal federalism issues – Some of the positive spillovers that innovation might yield may operate at the global level. E.g., insofar as iPhones improve people’s lives, such improvement is not conditioned on the iPhone’s having been invented within one’s own taxing jurisdiction. So just as any one country, if it is acting purely selfishly and unilaterally, lacks the incentive to impose carbon taxes that are priced at global marginal cost, so it might be expected to disregard or at least undervalue innovation’s positive spillover effects on outsiders.

On the other hand, “business-stealing” may be locally beneficial even if not globally so. Thus, local incentives to encourage innovation might end up being either too high or too low in the aggregate, but seem likely to be misdirected from a global social welfare standpoint.

I’ve commented here mainly on some of the broader implications, albeit as still unknown, that cause “Taxation and Innovation in the 20th Century” to be of especial broader interest. But I should also note one more time its yielding strong and robust empirical findings, of a sort that researchers more commonly wish for than achieve.


Packers And Movers Bangalore said...

Packers And Movers Bangalore Local Household Shifting Service, Get Free Best Price Quotes Local Packers and Movers in Bangalore List , Compare Charges, Save Money And Time @ Packers And Movers in Bangalore

Packers And Movers Bangalore said...

Packers and Movers Bangalore as a Services providing company can make all the difference to your ###Home Relocation experience. Bangalore based Company which offers versatile solutions, Right team that easily reduce the stress associated with a ✔✔✔Household Shifting, ***Vehicle Transportation. we help things run smoothly and reduce breakages and offer you seamless, Affordable, Reliable Shifting Services, Compare Shifting Charges @
Packers And Movers Bangalore

Packers Movers Chennai said...

Packers and Movers Chennai Give Safe and Reliable ***Household Shifting Services in Chennai with Reasonable ###Packers and Movers Price Quotation. We Provide Household Shifting, Office Relocation, ✔✔✔Local and Domestic Transportation Services, Affordable and Reliable Shifting Service Charges @
Packers And Movers Chennai

Best Packers And Movers Bangalore said...

Local Packers and Movers Bangalore List, Get Best Price Quotes, Compare Movers and packers Charges, Top, Local Household Shifting Services
Packers And Movers Bangalore

Packers Movers Jaipur said...

Get Packers and Movers Jaipur List of Top Reliable, 100% Affordable, Verified and Secured Service Provider. Get Free ###Packers and Movers Jaipur Price Quotation instantly and Save Cost and Time. Packers and Movers Jaipur ✔✔✔Reviews and Compare Charges for household Shifting, Home/Office Relocation, ***Car Transportation, Pet Relocation, Bike SHifting @
Packers And Movers Jaipur

Packers Movers Ahmedabad said...

Packers and Movers Ahmedabad - We Provide ***Best Service Providers, Safe, Reliable, Affordable, Trusted ###Movers and Packers in Ahmedabad List, Household Shifting, Office Relocation: Choose Top Verified Packers and Movers Ahmedabad Compare ✔✔✔Shifting Service Chrages, Price Quotation, Rate List Charts and Save Money and Time @
Packers And Movers in Ahmedabad

Packers and Movers Gurgaon said...

Packers and Movers Gurgaon Provide Reliable, Safe and Certified Service Provider list, Get Free ***Best Price Quotaition and Compare Charges. ✔✔✔ Hassle free Household Shifting Services, High Quality packing Material, Office Relocation, Car Transportaion, ###Local and Domestic Shifting Service @
Packers And Movers Gurgaon

Anonymous said...

Get Packers and Movers Kolkata List of Top Reliable, 100% Affordable, Verified and Secured Service Provider. Get Free ###Packers and Movers Kolkata Price Quotation instantly and Save Cost and Time. ✔✔✔ Packers and Movers Kolkata Reviews and Compare Charges for household Shifting, Home/Office Relocation, ***Car Transportation, Pet Relocation, Bike SHifting @
Packers and Movers Kolkata

Anonymous said...

I'm a professional in all kinds of hacking services, which leads me into giving out a blank ATM card to all individuals & serious minded people only. I hack, clone ATM cards worth's the total sum of $500,000.00 United States Dollars, with this card you can withdraw the sum of $3500 as daily limit till you cash out the sum total said sum & this cards has been cloned & hacked in the manner that you'll never be caught not detected during usage. For more info, kindly email us: OR Call/WhatsApp: +16626183756

Anonymous said...

A lot of us are still unaware of the recent development of the Blank ATM card.. An ATM card that can change your financial status within few days. With this Blank ATM card, you can withdraw between $1000-$10,000 daily from any ATM machine in the world. There is no risk of getting caught by any form of security if you followed the instructions properly. The Blank ATM card is also sophisticated due to the fact that the card has its own security making your transaction very safe and untraceable. For more info contact us with the below address and you can also watch our YouTube to read customers review.

WhatsApp/Call: +16626183756

Packers And Movers Pune said...

Packers and Movers Pune Provide High Quality ***Household Shifting, Home/Office Relocation, Insurance, Packing, Loading, ###Car Transportation Service Pune and High experiences, Top Rated, Safe and Reliable, Best and Secure Packers and Movers Pune Team List. Get ✔✔✔ Affordable Rate Charts and Compare Quotation and Save Money and Time .
Packers And Movers Pune

Packers And Movers Mumbai said...

Hire Best Packers And Movers Mumbai for hassle-free Household Shifting, ***Office Relocation, ###Car Transporation, Loading Unloading, packing Unpacking at affordable ✔✔✔ Price Quotation. Top Rated, Safe and Secure Service Providers who can help you with 24x7 and make sure a Untroubled Relocation Services at Cheapest/Lowest Rate
Packers And Movers Mumbai

shaan said...

Packers and Movers Bangalore
Packers and Movers Hyderabad
Packers and Movers Chennai
Packers and movers Kerala
Packers and Movers Whitefield


I have my ATM card already programmed to withdraw the maximum of $ 4,000 a day for a maximum of 20 days. I'm so happy with this because I got mine last week and I've used it to get $ 44,000. Mr Clifford is giving the card just to help the poor and needy even though it is illegal but it is something nice and it is not like another scam pretending to have the ATM cards blank. And no one gets caught when using the card. Get yours today by sending a mail to THIS IS 100% REAL. I AM A BENEFICIARY OF THIS. HACKERS EMAIL:

Richard said...

My wife was putting up some attitude and acting strange,and we have been married for eight years,I explained my problems to my friend and he recommended,I sent him a mail explaining my situation to him and he helped me hack into her phone,Walt sent me a WhatsApp conversation between my wife and her concubine which she told him everything about me and our marriage and he also recorded a call conversation between she and her concubine talking about how they were going to kill me and take my money and properties,I took this to court and I won the case,they were locked up in prison all thanks to Walt who saved my life through his hacking experience,every dollar I spent on this job was worth it,message him and he will help you with your problems.

Packers and Movers Ahmedabad said...

Hey, Wow all the posts are very informative for the people who visit this site. Good work! We also have a Blog.Please feel free to visit our site. Thank you for sharing.@ Packers and Movers Ahmedabad


I have been sticking around the blogs and guestbook but I have never met an hacker and private investigator as fast and discreet as the WHITEHATS ORGANIZATION. These set of superior Cyber terrorist Known as  "" have been in service for more than a decade and they have set an extremely impressive records that no Hacker can break,  they have the best hacking tools any one can ever imagine, that is why their job is performed with ease, contact them now for any of your hacking services like phone hacks, phone spy, social platform hack, bank loading, credits card loads and many more…You will be sure to thank me later

Brittany Seiber said...

To know more about Chief Dr Lucky you can visit his website (
 A friend that suffered from Herpes and was cure with the help of this great herbal doctor Chief Lucky so i decided to contact him for help in getting rid of my families genital herpes virus 1/2 which i did and all i was told to provide was just some useful information and some materials used in preparation of the natural cure and that i did and now i am the happiest person on earth because i am writing this testimony of mine with joy and happiness in my heart to the whole world to know that natural remedy is real because i am a living testimony of Chief Lucky traditional herbal cure and i want you all to contact Chief Lucky via his email: or WhatsApp him +2348132777335 am sure he will help you too.

Manik Gupta said...

Thanks for an awesome article!
Packers and Movers in Bangalore
Packers and Movers in Bellandur
Packers and Movers in Hebbal
Packers and Movers in Alwal

Ronit said...

Best blog i have ever seen, thankyou for sharing the article!!

Packers and Movers in Bangalore
packers and movers in BTM Layout
packers and movers in banashankari
packers and movers in marathahalli
Packers and Movers in Koramangala
Packers and Movers in Madiwala
Packers and Movers in Shivaji Nagar
Packers and Movers in Vijay Nagar
Packers and Movers in Hebbal

Unknown said...

My names are wizard William, I'm a citizen of United State of America, I reside here in California down-town, lives with

two kid's I had a divorce case with the father of my two kids and we got divorced. After a year I found myself in a very

romantic relationship so I moved in with my new boyfriend who shows care and affection, he actually makes me feel very

comfortable and took my kids like his, he wasn't working anyway so I was taking care of the bills why he looks after kids

and takes care of house chores. We decide to have savings on his account and we plan to run a business which leads the

saving, it was two years after when I noticed his changes, probably I should have noticed before I did but I spend long

hours at work and also trusted him so I didn't border myself in monitoring him, it was kind of late when I noticed he has

a kid's outside and also dating two ladies outside our relationship, really didn't want to believe the story when a doctor

friend of mine informed me, I decided to investigate myself but I couldn't, I was then referred to a Cyber hacker wizard

popularly known as Wizard Harry, I reached him via he responded and ask me

to WhatsApp him for a quick response through +1 (559) 851-5537. after reaching out to him and accepting the cost of the

service he got into the job and have my spouse iPhone cloned when I read his private conversation I got crazy and my life

was ruined, my heart got divided to known the truth that I wished I never knows the truth after I got to know the truth I

ended the relationship. today I'm with a good man who actually doesn't cheat, have carried some investigation about him

and no single bad report, he is what he said he is. I advise everyone to reach out to wizard Harry over a similar case

like mine. Wizard william is one in trillions.

perez turner said...

Has anyone here heard about blank ATM card? An ATM card that allows you to withdraw cash from any Atm machine in the world. No name required, no address required and no bank account required. The Atm card is already programmed to dispense cash from any Atm machine worldwide. I heard about this Atm card online but at first i didn't pay attention to it because everything seems too good to be true, but i was convinced & shocked when my friend at my place of work got the card from guarantee Atm card vendor. We both went to the ATM machine center and confirmed it really works, without delay i gave it a go. Ever since then I’ve been withdrawing $1,500 to $5000 daily from the blank ATM card & this card has really changed my life financially. I just bought an expensive car and am planning to get a house. For those interested in making quick money should contact them on: Email address : or WhatsApp him on +1(323)-723-2568

pavithrasri said...

Thanks for sharing this wonderful article

Packers and Movers in jayanagar
Packers and Movers in yeshwanthpur
Packers and Movers indiranagar
Packers and Movers in alwal"
Packers and Movers in yelahanka
Packers and Movers bommanahalli

pavithrasri said...

Loved this article! Thanks for sharing

Packers and Movers Bangalore
Packers and Movers in banashankari
Packers and Movers in bommanahalli
Packers and Movers domlur
Packers and Movers in yelahanka

sowmya said...

Loved this article! Thanks for sharing.
packers and movers in Bommanahalli
packers and movers in Jayanagar
packers and movers in Yelahanka
packers and movers in Malleshwaram
packers and movers in Vijayanagar

sowmya said...

Thanks for sharing this wonderful article.
Best packers and movers in Marathahalli
packers and movers in HSR Layout
packers and movers Electronic city
packers and movers in Whitefield
packers and movers in BTM Layout

Janani UKP said...

Nice blog post for reading and Thanks for sharing the wonderful article
No1 Packers and Movers Bangalore
Top and certified Packers and Movers in Banashankari
Affordable and certified Packers and Movers in Bommanahalli
Best and verified Packers and Movers Domlur
No1 Packers and Movers Vijayanagar
Best and cheap Packers and Movers ramamurthynagar

Janani UKP said...

Nice blog post for reading and Thanks for sharing the wonderful article
No1 Packers and Movers Koramangala
Top Packers and Movers in madiwala
Affordable Packers and Movers in Marathahalli
Best Packers and Movers shivajinagar
Top Packers and Movers in Hebbal
Affordable Packers and Movers in Yeshwanthpur

JANANI UKP said...

Nice blog post for reading and Thanks for sharing the wonderful article
Verified Packers and Movers HSR Layout
Top Packers and Movers in Jayanagar
Affordable Packers and Movers in Indira nagar
Best Packers and Movers Adugodi
Verified Packers and Movers Alwal
Top Packers and Movers in Electronic city
Affordable Packers and Movers in Yelahanka
Best Packers and Movers Rajajinagar

Aadhya said...

Nice Post..Thanks for sharing this useful information! This is really interesting information to read. Best high-quality Packing And Moving services at affordable prices within your budget.
@ Packers and Movers Hyderabad
@ Packers and Movers Bangalore

pavithrasri said...

Thanks for sharing this wonderful article

Best Packers and Movers in India
Packers and Movers in Pune
Packers and Movers in Mumbai
Packers and Movers in Chennai"
Packers and Movers in Delhi

sowmya said...

Loved your blog, thankyou for sharing this article!!
packers and movers in Belgaum
packers and movers in Bhiwandi
packers and movers in Amritsar
packers and movers in Dehradun

Janani UKP said...

Nice blog post for reading and Thanks for sharing the wonderful article
Verified Packers and Movers in Pune
Top Packers and Movers in Hadapsar Pune
Affordable Packers and Movers in Pimple Saudagar
Best Packers and Movers Baner
Verified Packers and Movers Shivaji Nagar Pune
Top Packers and Movers in Viman Nagar

sowmya said...

Loved your blog, thankyou for sharing this article!!
cyber security companies
Top VCISO Provider
information security consultants
information security audit
security penetration testing consultants

pavithrasri said...

Loved this article! Thanks for sharing

Top cyber security companies in delhi ncr
Cyber security expert in delhi ncr
cyber security expert