Megan notes Kevin Drum’s amazing ignorance on tax matters:

[Drum]During the 50s, top marginal rates were around 90%, and if high tax rates on the rich harm the economy then the tax rates of the 50s should have literally brought the United States to its knees. But even with heroic efforts, you can’t make the case that those tax rates were anything more than a tiny drag on the economy. And if 90% rates produced only a tiny drag, then the effect of moving from, say, 35% to 40% would be literally too small to measure.
— 
[McArdle]This is not at all what the cited literature says.  It doesn’t tell us that marginal tax rates don’t matter, but that we haven’t been very successful at raising marginal tax rates.

 
I see casual commenters make this error all the time, but Drum is supposed to be….  actually, I’m not sure what the hell he’s supposed to be, but anyone who has ever looked at the question knows that virtually no one actually paid the 90% rate due to a plethora of loopholes.

The economically illiterate aside, what always bothers me about this question is that in the long run the growth rate affects the tax revenue, and the longer you go out the more the difference matters, so what you’re really asking is at what point in time you want to maximize the tradeoffs.

Now, obviously there’s a bottom beyond which government spending can be extremely efficient — the absence of roads, courts, police, certain necessary regulations would obviously have a huge adverse affect on the economy — even if governments probably aren’t very efficient at actually preferentially allocating their spending towards the most efficient uses.  But likely somewhere around 20-25% of GDP there’s a level of total spending (spending is the actual tax rate; deficits are just deferred or shadow taxation) that could have double tax revenue at some distant future point as compared to current levels (and, not incidentally, double living standards, improve the capabilities of the human race, etc).

Of course, to get there, we need massive spending cuts.  The government shouldn’t be giving food stamps to lottery winners and subsidizing an able adult male’s diaper fetish as a “disability,” public sector retirement packages are obscene, and we should not be promising people who reach 62 a third of their working lives on the dole — it’s long past time we brought some actuarial sense to Social Security, at least gradually.