Walking Up The Laffer Curve

Posted on April 28, 2012 by yellojkt

A Financial Times article posits that we are undertaxing the rich.

Another reason advanced for not raising taxes on the highest incomes is that it would not make much of a difference. In fact, the income shares at the top are so high that this is no longer true. Thus, raising the average income tax rate on the top percentile to 43.5 per cent from the low level of 22.4 per cent in 2007 would raise revenue by 3 per cent of GDP, closing much of the structural fiscal deficit, while still leaving the after-tax income share of the top percentile more than twice as high as in 1970.

However this assumes that capital gains are taxed at the same rate as wages, otherwise the income is just renamed and the effect of the higher rate is nullified.

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