yossarian wrote:
I'd encourage gbaji to make up his mind, but perhaps it is more fun this way.
I did make up my mind. The point you're missing out on completely is that "highest marginal tax rate" has nothing at all to do with this. That's simply the highest rate within any given bracket (usually just income in this context) that can be applied. So, in a progressive income tax system like the US uses, if the highest marginal tax rate is set at say 35%, then no matter how high your income is, you only pay 35% of that income in tax.
It's meaningless here because personal income is not the most significant factor. Corporate taxes (which include a whole slew of taxes having nothing to do with the relatively simplistic income tax) have a *huge* effect on it. Capital gains taxes also impact it (but more in their secondary effect in terms of where investment goes and how willing people are to shift money from one investment to another at any given time). Import and export taxes can have an effect on it. And a whole slew of regulatory taxes can as well.
The reason I simplify this to "tax rate" is because there is no one single tax rate here. However, I thought it was pretty obvious from the context of my posts what kind of taxes I was speaking of.
For the sake of completeness, I'll admit that I've also used the term "tax rate" to mean the percentage of total GDP consumed by government taxation, regardless of method or source. That's another relevant number, and certainly is also something you should strive to keep "low", but isn't itself a direct determinant of GDP growth. This is illustrated by one of the more interesting aspects of the Bush tax cuts. By cutting specific taxes on big businesses, the total tax collected from those same business sectors actually increased over time. This is known as the Laffeur curve (think I spelled that right). Basically, if you're overtaxing you can actually hinder growth in an industry and reduce the potential tax base over time. By cutting taxes you allow those industries to grow and ultimately collect *more* taxes as a result. The reason I make this observation is because you can have higher "tax rate" (ratio of GDP to federal revenue) as a result of reducing the "tax rates" on selected portions of the economy.
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In any event, whether fools believe it to be true or not, the highest marginal tax rate has decreased roughly by a factor of 3 since the end of world war II in the USA and there is no correlation between this and increased growth in per capita GDP.
Yes. And the cost for a cup of coffee has gone up as well. Which has exactly the same relevance.
The significance of the highest marginal tax rate is to personal finances. It's not going to affect the economy as a whole. Not directly. It's biggest effect is actually on the rate of small business ownership. The lower that rate, the more likely people will start up or own their own businesses since the income from those businesses are counted as personal income for the owner. That can have a small effect on GDP, I suppose, but it's incredibly minor compared to taxes that affect large corporations. Those are the tax rates that determine whether a large business offshores or not. It determines whether or not they build a new plant in Knoxville, or build it in Pune. It has a direct effect on employment rates, domestic production (which should obviously affect GDP, right), cost of end products to consumers, etc...
I already said that this wasn't a relevant number to look at. Why did you just ignore that and continue arguing the same wrong point?