An Economics Lesson for Democrats

[andyfox]

There is no evidence that cutting the highest marginal tax rate creates jobs. In fact, there is evidence that productivity goes down when the highest marginal tax rate goes down. A government has a choice about where and from whom it will collect revenues. A decision to lower the tax rate on X usually means a decision not to lower the tax rate, or to raise the tax rate, on Y. For example, President Bush has said that he would like to see the tax code simplified during his second term and that he would like such simplication to be revenue neutral. Unless everybody ends up paying the exact same amount they would have without simplification, a revenue neutral plan will result in some paying more and some paying less. The argument, no doubt, will be over exactly who pays more and who pays less.

When the impact of all taxes, not just the federal income tax, is taken into account, the middle class pays about the same rate as those above them.

As for the Democaratic Party, my sentiments, as I have indicated here before, is that is it the party of no ideas. As for the charge that the Bush tax breaks were breaks for the rich, Bush's own rhetoric contributed to this. When he says that a waitress making $20,000 a year and a corporate lawyer making $200,000 deserved the same percentage tax cut, he leaves himself open to the charge.