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Monday, March 16, 2009

When a picture says a thousand words

From this paper concerning labor supply elasticities:



What does the picture show? That either the highest marginal tax rate in Denmark was somehow chosen just right so that there was a mass of individuals who "bunched" right below it or, wait for it, people responded to the highest marginal tax rate and bunched right below it. It is a beautiful picture and one that should be shown to the folks who believe that marginal tax rates don't matter.

Remember the $250,000 dollar limit in the U.S.? The Danish aren't all that much smarter than we are. I would go out on a limb and predict a similar picture would obtain in the United States.

HT: Ambrosini Critique

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