Wednesday, April 22, 2009

Tax rates and revenues

Good point:
Those who claim that the government will be able to get a lot more tax revenue by increasing tax rates on the rich live in a fantasy world...over the past 40 years, maximum income tax rates have ranged from 28 percent to 70 percent, yet tax revenues as a percentage of gross domestic product have been remarkably constant, ranging from a low of 16.3 to a high of 20.9 percent of gross domestic product.
The only way you can achieve both higher tax revenue with its percentage of GDP remaining rather constant is if GDP increases along with the higher taxes, which seems rather counter intuitive.

Why do higher rates fail to produce significantly higher income? With 70,000 pages in the tax code there are plenty of loopholes for lawyers to take advantage of.

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