Historically, America’s population increases at a rate of roughly 2% per year.  And that’s just those who are here legally.  So for a tax and economic policy proposal to be at all effective, it must provide incentives for work, increased economic growth, and more and more job creation.  Without robust economic growth, especially during a period of economic weakness, the US risks falling back into the malaise of the Jimmy Carter years that brought us double digit inflation, near double digit unemployment, and interest rates approaching 20%

Cambridge, Massachusetts is hardly a rightwing den of free market iniquity, but Harvard economist Greg Mankiw has demonstrated with stunning simplicity just how wrong-headed the tax and economic policy proposals of Barack Obama would be for the country.  By comparing the Obama and McCain proposals, as reported by the Wall Street Journal in a side-by-side comparison (here), Mankiw shows that under the Obama tax plan, any additional economic activity on his (Mankiw’s) part simply isn’t worth the effort

By Mankiw’s calculations, all carefully detailed,

Let t1 be the combined income and payroll tax rate, t2 be the corporate tax rate, t3 be the dividend and capital gains tax rate, and t4 be the estate tax rate. And let r be the before-tax rate of return on corporate capital. Then one dollar I earn today will yield my kids:

(1-t1){[1+r(1-t2)(1-t3)]^T}(1-t4).

every additional dollar he would earn under the Obama plan would net his children $1.85.  Under McCain’s tax plan, that figure rises to $4.81!  By comparison, a system with no taxes at all would yield his children $28.00.  As Mankiw puts it,

Under the Obama plan… a dollar earned today yields my kids $1.85. That is, Obama’s proposed tax hikes reduce my incentive to work by 62 percent compared to the McCain plan and by 93 percent compared to the no-tax scenario. In a sense, putting the various pieces of the tax system together, I would be facing a marginal tax rate of 93 percent

The bottom line: If you are one of those people out there trying to induce me to do some work for you, there is a good chance I will turn you down. And the likelihood will go up after President Obama puts his tax plan in place. I expect to spend more time playing with my kids. They will be poorer when they grow up, but perhaps they will have a few more happy memories.

For an elegantly detailed explanation, read the whole thing.  Obama is offering a total long-term marginal tax rate of 93%… with a total rate of return less than one third that of McCain’s plan!  Under Obama’s proposals, additional work and additional economic activity simply aren’t worth the effort.  Obama would “disincentivize” economic growth and productivity

The very last thing this country needs, particularly in an economic downturn, is a tax policy that discourages work, discourages savings and investment, and discourages and economic growth

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