More on Tax Reform
KUDLOW
A recent Bruce Bartlett column reports
on class warfare charges by the New York Times. Looking at the latest IRS data for 2003, the top 1% of income taxpayers paid 34.3% of personal receipts at the top marginal tax-rate of 35% (which went into effect in July, I believe), though they earned only 16.8% of adjusted gross income.
Inside the top 1% group, the top one-tenth (top 0.1%) paid 15.3% of income taxes. " These 129,000 tax filers earned 7.6% of the income and paid an average tax rate of 23.6%. This came to $114.6 billion -- four times more than all the taxes paid by the 64 million taxpayers in the bottom 50%-- who paid an average tax rate of 2.9%. "
Noteworthy is the fact that the top earners paid much less when the top tax-rate was 70% at the beginning of Ronald Reagan's presidency. At the end of the Carter era, the richest paid only 19.7% of taxes, and the very richest paid only 7.6%.
The Times, of course, continues to editorialize that Republican tax policy totally favors the rich.
Yet the facts speak otherwise. Lower marginal tax rates induce changes in economic behavior. These behavioral responses lead to more risktaking, more capital formation and more work. That is what the income tax payment data show. The most successful economic activists earn more and pay far more in taxes. The ladder of upward mobility is jam packed with non-rich folks who become rich.
And, according to Mr. Bartlett's research, a report from the Government Accountability Office finds deadweight loss of 2% to 5% of GDP from efficiency costs of our incredibly complex and convoluted tax system.
Pres. Reagan left us with a two-bracket system of 15% and 28%. If we took that as a starting point, and maintained a 15% rate on capgains, dividends and estates, along with unlimited universal savings accounts taxed as Roth IRAs, along with a 20% corp tax coupled by full cash expensing for capital goods investment, and territorial rather that worldwide taxation, then we'd garner so much more income growth that tax reform would more than pay for itself with close to 5% yearly GDP growth.
The Times might hate it, but everyone else who works for a living surely would love it.
lkmp.blogspot.com |
