Tuesday, October 4, 2022

pejoratives vs. powerful econ concepts: "trickle down" and "supply-side tax cuts"

 A great title in an essay by James Petrokoukis related to the pejorative ("trickle-down") used to describe a powerful Econ concept ("supply-side" tax cuts). The idea is simple and inarguable: cutting tax rates encourages more of the behavior being taxed. In the case of income taxes, it promotes productivity, entrepreneurship, innovation, honesty in tax returns, etc.

Aside from the ethics of (high) taxation, "by how much" is the important follow-up empirical question. Clear net benefits when JFK cut the top rate from 91% to 70%. Clear net benefits when Reagan and the Dems cut it to 28%. Since then, it's mostly dinking around with rates between 28% and 39.6%.

What do proponents of higher tax rates want?
-The top 1% pay 40% of federal income taxes; the top 50% pay almost all of it. Who would want these proportions to be even higher?
-The bigger deal in federal taxes on income is FICA, but the Dems love that terrible tax on the working poor and middle class, demagoguing any efforts to talk about changing it.
-The real answer: an op for pols and partisan enablers-- for Dems to pose against the wealthy/productive; and for GOPers to pretend they're fiscally conservative.


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