The main change in terms of the budget balance is all the extra spending not the tax increase. Spending has gone from $1.8tril to $3.8 tril per year. The tax cuts, even if you use static scoring, have not been close to $2tril/year, I think the main study I've seen used to attack the tax cuts for causing revenue losses shows more like $1.8 tril total over 10 years or $180bil a year. Considering the disincentives and distortions of higher tax rates, the actual revenue loss would be less than that, perhaps a lot less, but even going with the $180bil a year figure I don't think moving the deficit from maybe $1.7tril to $1.52 trillion is going to produce a lot of extra economic growth.
Also I'm arguing against 100% rates here. Whatever the overall effects of the most recent federal income tax rate cuts, 100% taxes are going to cause far more problems than benefits, and will even reduce revenue compared to some lower rate. In the short run the revenue maximizing rate might be 50%, maybe 60%, maybe even 70% but its no 100%. In the long run it would be lower than in the short run. And that's just about revenue maximization, which should hardly be our only goal, as you approach the revenue maximizing rate each extra dollar in increased revenue is bought at a higher cost to the private sector. |
