Friday, November 23, 2012

Tax rate policy - why the muddle?

Stephen Moore wrote an editorial "Why Lower Tax Rates Are Good For Everyone" in the WSJ which lays out a strong case for lower not higher rates. Granted the size of the deficit is high and there will have to be higher tax burdens at some time. However, the burden should be on growing revenue not setting rates. More growth will add more revenue. Fewer deductions will add revenue and reduce distortions. History shows that lower rates have lead to more revenue. This can be achieved even with a progressive tax system. The tax system becomes less progressive when deductions are greater.

When Coolidge, Kennedy, Reagan and Bush lowered tax rates, revenue increased. What is different this time? 

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