Leftists and Progressive Taxation
In his column today at Townhall.com, Dan Mitchell, senior fellow at the Cato Institute, asks "what’s the higher priority for Leftists, raising revenue or punishing success?"
Mitchell begins the column by writing:
"On the issue of so-called progressive taxation, our left-wing friends have conflicting goals. Some of them want to maximize tax revenue in order to finance ever-bigger government.
"But others are much more motivated by a desire to punish success. They want high tax rates on the “rich” even if the government collects less revenue.
"Some of them simply pretend there isn’t a conflict, as you might imagine. They childishly assert that the Laffer Curve doesn’t exist and that upper-income taxpayers are fiscal pinatas, capable of generating never-ending amounts of tax revenue.
"But more rational leftists admit that the Laffer Curve is real. They may argue that the revenue-maximizing rate is up around 70 percent, which is grossly inconsistent with the evidence from the 1980s, but at least they understand that successful taxpayers can and do respond when tax rates increase.
"So the question for grown-up leftists is simple: What’s the answer if they have to choose between collecting more revenue and punishing the rich with class-warfare taxation?"
He then delves into several research efforts that look at the tradeoffs involved. He also includes several helpful charts and tables, and concludes by writing:
"We like a flat tax because it treats people equally and it raises revenue in a relatively non-destructive manner.
"But because it is an “efficient” form of taxation, it’s also an “efficient” way to generate revenues to finance bigger government.
"Indeed, this was one of the findings in a 1998 study by Professors Gary Becker and Casey Mulligan.
"So does this mean that instead of supporting a flat tax, we should a loophole-riddled system based on high tax rates solely because that system will be so inefficient that it won’t generate revenue?
"Of course not. At the risk of stating the obvious, this is why my work onfundamental tax reform is intertwined with my work on constitutional and legal mechanisms to limit the size and scope of government.
"And it’s also why Obama’s class-warfare approach is so perversely destructive. If you think I’m exaggerating, watch this video – especially beginning about the 4:30 mark.
Here is the link to the Dan Mitchell's entire article, which itself includes links to various documents.
For more on progressive taxes, see this Econlib article by Joel Slemrod.