bob samuelson_1

From Robert Samuelson at The Washington Post, The coming middle-class tax increase

There is a broader message here. Both parties have constructed rationales for avoiding middle-class tax increases, which would be highly unpopular. It’s not that these rationales are illegitimate: The effect of tax policies on economic growth is clearly important; similarly, redistribution is a central function of the welfare state. But the resulting tax policies don’t come close to covering the real costs of government.

HKO

For all their soak-the-rich talk higher taxes on the rich will raise revenues minimally and will barely impact inequality. If they raise it too high production and investment – and its accompanying job and wage growth  – suffer and the outcome is totally counterproductive.

With tax rates where they are lower rates, even with fewer deductions, will still leave lower revenues even when scored dynamically.  There is the further risk, rarely addressed, that the  voters and investors have such little confidence that the rates and the policy will remain unchanged for very long that they are less likely to respond to tax incentives in any long term way. They have become jaded at tax reform.

There is one other option that Samuelson omits: reduce payments from the welfare state to only those that truly need it. There are many benefits that are aimed at middle class tax payers.  As the author noted there is no way that revenues can be significantly raised without the middle class paying a significant portion- one way or the other.

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