Difficult Facts About Marginal Tax Rates

This article presents some difficult facts for those who argue that government should pay for new spending by only increasing taxes on the rich (e.g., only increasing the top marginal tax rate). The data show that the top marginal tax rate has little if any relationship to tax returns, which appear to always stay at 16-20% of GDP.

The author argues, then, that tax rates should be set so as to best spur economic growth, i.e., to increase GDP. While that certainly makes sense, it does not by itself argue that the latter is best accomplished by cutting taxes on the rich. Tax cuts of an equal dollar amount could be given to the middle class, for example. It would be interesting to see data about how tax rates on different different income levels increase economic growth.

Whatever those results, say, however, they must be balanced against issues of fairness, of course. None would argue that we should give tax cuts, say, only to the rich.