Do Higher Tax Rates Mean More Government Revenue?

I don't doubt there is a point at which tax rates become high enough to have enough negative impact on the economy to cancel themselves out. I don't even doubt that the peak could be around 33% or so. But I remain skeptical in the realization that you can make these kinds of statistics say almost anythng you want them to say. And frankly, I'm not as concerned with the rate income taxes as I am with the proliferation of superflous deductions, shelters and boondoggles, and the goverment's definition of "income," which leaves trust fund babies (and any wealthy enough to derive most of their income from investment portfolios instead of salary) paying less than wage earners. And no, I don't believe that we can get out of debt just by taxing the wealthy. But I do think we're going to continue to build debt by letting them pay ess and less.

People bitch about redistribution of wealth. We've been redistributing wealth in America for 30 years. We've just been pushing more and more of it up. And frankly? It started out as a good thing. This moderate beileves our top tax rates were too high 30 years ago. We fixed it. We can stop now. We can let temporay tax cuts designed as short term stimulus against a business cycle that passed years ago be temporary. Most importantly, we can eliminate hundreds of shelters and deductions, lower our corporate income tax rates and eliminate our corporate government subsidies, and tax capital gains as what they are -- income. Oh, and in order to make that possible, we can take private money out of politics and make accepting thousands of dollars from corporations and lobbying organizations for influence what it actually is - bribery, a crime.

But we won't.

Tim
 
As with most things economics, there is fairly broad consensus that "some dynamics are at work" (obviously at 100% tax, revenue would be zero). Consensus on what is going on is as usual highly politicized, and "scientific analysis" tends to be heavily biased based on ideological leanings. Here is some comments on the infamous "laffer curve" (from Wikipedia)

Tax rate at which revenue is maximized

A possible non-symmetric Laffer Curve with a maximum revenue point at around a 70% tax rate, based on "How Far Are We From The Slippery Slope? The Laffer Curve Revisited" by Mathias Trabandt and Harald Uhlig.[11]

The New Palgrave Dictionary of Economics reports that a comparison of academic studies yields a range of revenue maximizing rates that centers around 70%.[2]

Economist Paul Pecorino presented a model in 1995 that predicted the peak of the Laffer curve occurred at tax rates around 65%.[12]

A 1996 study by Y. Hsing of the United States economy between 1959 and 1991 placed the revenue-maximizing average federal tax rate between 32.67% and 35.21%.[13]

A 1981 paper published in the Journal of Political Economy presented a model integrating empirical data that indicated that the point of maximum tax revenue in Sweden in the 1970s would have been 70%.[14]

A recent paper by Trabandt and Uhlig of the NBER presented a model that predicted that the US and most European economies are on the left of the Laffer curve (in other words, that raising taxes would raise further revenue).[11]
 
And of course, there are those that believe that Government shouldn't maximize revenue. Indeed, revenue should be minimized, and government starved to the point that it can easily be "dragged into the bathtub and drowned."
 
Dennis Prager - I remember reading his idiotic article in The Absolute Sound justifying his expensive audio system a few months ago.

Didn't realize he had to justify it to begin with.

After reading the article it made even less sense. It was self-absorbed drivel.
 

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