Standard economic theory says that taxation reduces productivity. If you tax income, you reduce the incentive to work. If you tax capital gains, you reduce the incentive to invest, and so on. When you discourage useful economic activity, the economy becomes less efficient.
But what if it were possible to impose taxes in a way that also increased productivity? That’s the promise of a clever new theory by economists Daphne Chen, Fatih Guvenen, Gueorgui Kambourov and Burhanettin Kuruscu.