Click here to read my column in Sunday's NY Times. I expect this one will generate more than its share of irate letters.
There is nothing in Mankiw's article to make anyone irate. He describes why very talented people may make very large piles of money and then explains that they pay a lot in taxes:
A reliable tax system is also important to ensure that the wealthy pay their fair share to support the public weal. That is generally the case. Our tax system is far from perfect and is arguably in dire need of reform, but examples of the tax-dodging wealthy are not at all the norm.
The Tax Policy Center estimates that in 2013, the top one-tenth of 1 percent of the income distribution, those earning more than $2.7 million, paid 33.8 percent of their income in federal taxes. By contrast, the middle class, defined as the middle fifth of the income distribution, paid just 12.4 percent.
So, by delivering extraordinary performances in hit films, top stars may do more than entertain millions of moviegoers and make themselves rich in the process. They may also contribute many millions in federal taxes, and other millions in state taxes. And those millions help fund schools, police departments and national defense for the rest of us.
The thing that should make one gasp is that Mankiw may be the most famous proponent of lower income taxes for the rich and, apparently, the editor cut another plea for lower taxes on upper income people from today's piece.
Here is an excerpt from an article where he describes how one rich guy works less because of high taxes (and here is an earlier blog post). He goes on to suggest that the non-rich bear much of the burden because we won't be able to enjoy movies, sports and orthodontic services as those workers cut back on their labor:
Reasonable people can disagree about whether and how much the government should redistribute income. And, to be sure, the looming budget deficits require hard choices about spending and taxes. But don’t let anyone fool you into thinking that when the government taxes the rich, only the rich bear the burden.
Has there been a study that ties the price of braces to the marginal tax rate?
And you also wonder if the key component of the Pigou Club is not the optimal taxation of energy but the revenue neutrality of energy taxes (i.e., the increased energy taxes would be offset by lower income taxes) [to be fair, this longer article in the Eastern Economic Journal never mentions reducing taxes on the rich; it's free here].
I don't think Mankiw understands what makes people irate. It is not so much the market based wages that upper income people earn, it is the argument for an upper income tax cut (i.e., making Bush tax cuts permanent) that is greater than U.S. per capita income.
Update: Here is how Krugman put it:
Mankiw argues that our tax system is fair because the top 0.1 percent pays a higher share of income in federal taxes than the middle class. This neglects the partial offset of this progressivity by regressive state and local taxes. But surely the main point is that to the extent that taxes on the 0.1 percent are high (they aren’t really, in historical context) that’s largely because Mitt Romney lost the 2012 election, so that Obama’s partial rollback of the Bush tax cuts and the high-income surcharges that partially finance health reform remained in place and the Ryan budget didn’t happen. It’s kind of funny to claim that our system is fair thanks to policies that you and your friends tried desperately to kill.