Subtitle: Pipe Dreams
Greg Mankiw makes more than a quarter-million dollars a year. We know that, because he's expecting to pay the 2-4% payroll tax surcharge under Obama's tax plan, on any extra dollars he earns.
He's also planning to leave his children more $3.5 million dollars (the current inheritance tax exclusion) when he dies. We know that, because he's expecting them to pay the 55% inheritance tax on any extra dollars he adds to his estate.
But he's a simple guy. He doesn't have fancy tastes, and he's not concerned with leaving his children with a huge windfall.
Nice of him to prove the point: when you've got that much money, and are making that much money, more money isn't the key incentive to work more. There's far more utility in spending time with your loved ones.
If Greg's offered a speaking gig with a $10,000 honorarium, it's not the $10,000 that's gonna get him on the plane on that snowy winter night. It's the benefits to his reputation, the opportunity to rub shoulders with his colleagues, the non-financial incentives that accompany that speaking offer.
Larry Ellison isn't looking to build his business bigger because it's gonna have any perceptible impact on his lifestyle or his children's inheritance. They'll be fine.
But what about Joe the plumber? He made $40,000 in 2006. (But he'd like to buy the plumbing business he works for. The owner wants $250,000.) Do you think Joe's $500 tax savings every year under the Obama plan might give him more incentive to work hard and strive for greater things? It doesn't seem like he'll be buying that business any time soon. But maybe one of his kids will...
Give ten, twenty, forty million more Americans a place to stand, and they'll move the world.