| If Bill Gates paid 100% of the personal income taxes of the nation, then by definition, any reduction in personal income tax rates would disproportionally benefit him. Because in this country, we have a system where people who earn more on a pretax basis are taxed at higher rate as they make more, then it is a mathematical artifact that an overall x% reduction in personal income tax rates will see those who currently have the highest tax rates save the most money in terms of dollars. But that should not be surprising. If John currently pays $100,000 in taxes and gets his taxes reduced by 5%, he saves $5,000. If Harvey is currently paying $10,000 in taxes and gets a reduction of 5%, his tax savings is $500. Gore would argue that this scenario is unfair, since of the $10,500 tax reduction, 95% of the benefit goes to the wealtier person. Instead, Gore proposes tax reductions that increase the steepness of the progressive tax structure, meaning that a disincentive is created for getting ahead. By making the tax code more complicated, Gore increases incentives to hide income via complex tax shelter strategies, which removes what could be a productive use of money from future economic growth. A flat tax similarly on the surface benefits those considered wealthy right now. What flat tax detractors fail to tell you is that it the cost of collecting taxes would drop like a rock also, so that instead of it costing the government 30 cents to collect a dollar in taxes, it might cost 5 cents. The result of that would be that Americans could actually pay less in taxes and the feds would end up with the same dollars in the kitty. Taking it a step further, tax revenues into the government would actually rise if everyone had to pay a flat 17% rate and if there were no tax shelters. For those like Gore who view the tax code as a way of social engineering, having more money to play with would create more money for social programs. The problem with Gore's tax plan is, that instead of creating a tax code that will increase revenues flowing into the government, he complicates the tax code, making it more expensive for the gov't to collect each dollar. Secondly, the increase in the slope of marginal tax rates create a disincentive for work and income. The result is that tax receipts into the government are hindered and there is less money to dole out for his pet social programs. Bush's tax idea is imperfect, but at least it is a step in the direction of a flatter tax structure, which like I said earlier, makes for an incentive for personal work and financial gain. |
