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> Not necessarily. For instance, if motivation vs. redistribution (M vs. R) graph looks like an inverted "V" letter where the peak is at R=0, your conclusion would not generally hold.

Yeah, but it has to be not smooth, and at that particular point. If the government taxes you a little, you work slightly less. If they subsidize you a little, you work slightly more. Taxes are just negative subsidies and vice versa. There's no reason for it to not be smooth.

> But the problem in this case is that I cannot think of any counterexamples. Can you recall any?

The US redistributes money. Are they taking as much as they can without imploding the economy? How do you even establish that? And what makes the answer "no" as opposed to "not yet"?






Yeah, but it has to be not smooth, and at that particular point.


Realistically, it won’t be smooth or even continuous. First, even if an income tax is set at a rate close to zero, government still needs a sizable bureaucracy to collect it and it would create a non-zero amount of trouble for taxpayers. Second, there is a psychological effect. Many people would suffer a non-zero negative effect on their motivation if told that a fraction of their job compensation would go to a cause they don’t like (even if the fraction itself is approaching zero).

The US redistributes money. Are they taking as much as they can without imploding the economy?


I guess the words “without imploding the economy” are redundant. I should have said simply “as much as they can”. And I think it is true in the case of the US. The federal government found it impossible to collect more than ~20% of the GDP in taxes. JFK once said that his motivation for lowering the tax rate is to raise the total tax revenue.
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melian
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