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Trivia Tidbit Of The Day: Part 450 -- America Could Suddenly Become A High Tax State.

Global Capital Likes To Be Treated Well-

Quoth Will Ferrell, as Harry Caray:

Hey! What about this: if you had to choose between being the top scientist in your field or getting mad cow disease, what would it be?

The Tax Foundation notes that if the Bush tax cuts expire, the United States will have one of the highest tax burdens of any nation:

The 2001 tax cuts that lowered U.S. individual income tax rates were part of the broader tax-cutting trends in the OECD from 2000 to 2006, and they succeeded in dropping the U.S. from 15th to 21st in the OECD rankings on marginal income tax rates. If lawmakers in Congress impose a surcharge as part of AMT reform and allow the 2001 tax cuts to expire, the U.S. will jump to 9th in the rankings. This will not only reverse the positive economic benefits from the 2001 tax rate reductions but will also harm the international competitiveness of our individual income tax system.

So, it seems like we face a Harry Caray-esque choice, here. We can either lower our tax burden (the equivalent of being the top scientist in our field), or we can let our economy tank (mad cow disease).

It's not a tough choice.

The only possible explanation for accepting a poorer economy and higher taxes might be the funding requirements of an ever-burgeoning network of big government programs aimed at achieving left-wing "social justice." But higher taxes don't always mean more government revenue.

Indeed, we could probably glean more tax revenue from a lower corporate tax rate, anyway. In fact, based on the Laffer Curve, the optimal tax rate (from a tax revenue maximization standpoint) is probably around ten percent lower than it is today:

There's a trend here. At least 25 developed nations have adopted Reaganite corporate income tax rate cuts since 2001. The U.S. is conspicuously not one of them.

Not to mention that we might be able to glean precisely the same proportion of revenue with a rate 20-30 percent lower than it is today. Ireland, for example, with its 12.5% corporate tax rate, collects a higher rate of government income from businesses than the United States, with our rate of nearly 40%.

So, just to reiterate, we're already now right at the top, in terms of having the highest corporate tax rate in the world. If we're not careful, we could suddenly have the highest total tax burden, period, in the world.

Previous Trivia Tidbit: Falling Budget Deficits.

Posted by Will Franklin · 27 July 2007 09:41 AM

Comments

Posted by: Hoodlumman at July 27, 2007 10:47 AM