Taxes Are Worse Than You Thought

“It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues, in the long run, is to cut the tax rates.” 

– John F. Kennedy (Yes, a Democratic president back in the Camelot days of the early ’60s wanted to slash taxes.)

This week’s Outside the Box will make half of my readers indignant and the other half feel righteously vindicated in their thinking. I have no idea which half you are in. What is so controversial? Who pays taxes and why they should.

Today’s letter was sent to me by reader Tom Bentley. It bears the in-your-face title “Taxes Are Worse Than You Thought.” It’s by Mark J. Perry, whose bio tells us that he’s a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan. So yes, he is a conservative.

The point Mark is trying to make is that the top 1%/5%/10% are already paying the bulk of the income tax. From his viewpoint that is fair, or even more than fair. Although I will point out that he does include a chart which shows that the progressivity of tax rates, which climb relentlessly upward with income, surprisingly fails at incomes of over $10 million. I assume that is because at that point capital gains tax and other tax-incentivized income come into play that is typically not available to those of us with merely mortal incomes.

These statistics come from government data. I’ve seen the same type of data demonstrated before in other venues, so there is not much disputing Perry’s facts. I doubt this piece will make those who feel that “the rich” should pay more change their minds.

What I would point out, in the vein of the philosophy that my dad regularly quoted to me, is that you can’t squeeze blood from a turnip. There is only so much more income tax that we can extract from the top income tier of the country without doing serious damage to the economy. As Tom said in his note to me accompanying the link,