Must read on taxes

I usually try to post original material, but this article by Casey Mulligan is a worth a link.

Based on Mulligan and Becker's paper I wrote (in Swedish) about the same issue "Flat Taxes: More efficient taxes may be expensive".

Basically not only the direct efficiency of tax reform, but also the broader effect of tax reform on the political system must be taken into account. If more efficient taxes lead to larger government and more spending, the inefficiency from the increased spending may be worse than the efficiency gain from new taxes.

(note: an implicit assumption is that there are externalities in the political market which produces this result).

Beware of flat taxes. The Swedish tax system is very close to a flat tax (because most of revenue is VAT and payroll taxes). This tax system which is very efficient in collecting tax revenue, which is part of the reason the government is so large.