Opponents of extending and making permanent the Bush tax cuts of 2003 have to come clean. Why, exactly, do they favor higher marginal tax rates on the wealthy? It cannot be that it deprives government of needed revenue, the evidence is overwhelming that lower marginal rates do not “cost” government anything. Investor’s Business Daily makes it plain:
Revenues rise after tax rates are reduced. Federal revenues bottomed at $1.8 trillion just as Bush signed his bill; since then, they’ve risen 19.4% to $2.15 trillion, an all-time high.
A big reason is that tax avoidance recedes along with rates. When top personal rates are high, the rich find ways to pay less. That’s why our tax code is 55,000 pages thick. When rates are lower and flatter, such behavior disappears.
This also explains why the richest Americans’ share of all income taxes paid has soared to 34.27% from 19.05% in 1980 even though their average income-tax rate has fallen by roughly a third — from 34.47% to 24.31% in 2003.
So the rich also pay more of the total income tax load with lower rates. Why would we, as a society, want higher rates on them? If it is to simply try to make them less wealthy by confiscating their income and, in quick order, removing the incentive to even try to be wealthy, well, then we need to be clear about that.
Backers of higher marginal tax rates should just say that they oppose wealth and wealth creation and think the benefits of a wealthy, growing economy are overstated. Then we can debate that case on its merits, or lack thereof.
But no more of the fiction that lower marginal tax rate on capital investment or productive labor somehow cost anyone, anything.
