February 20, 2015

THE REVOLUTION WAS FOR REPRESENTATION, NOT AGAINST TAXATION:

Economic Freedom and the Size of Government (James E. Mahon Jr., Williams College, January 1, 2015, SSRN)


Abstract:      [...]

[I]t matters a great deal whether we define size as expenditures or taxation. Spending has no relationship with freedom, or a negative one, across this data set. Initial tax revenue levels, however, positively predict subsequent changes in economic freedom. We find similar patterns using different measures of economic freedom and whether we use annual data (1995-2010) or overlapping six-year averages going back to 1970-75. These results challenge the common preconception that taxes and economic freedom are negatively related. In addition, the divergence between tax revenue and spending in this regard is more consistent with a "fiscal contract" model of the state, in which taxation and economic freedom go together, as governments attend to their legitimacy and the health of the private sector in order to increase revenue, but flag in these efforts when they enjoy sources of income other than taxes.

Posted by at February 20, 2015 10:32 AM
  

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