The Incidence Of Taxation
New York Times features a story based on calculations of how much different groups earned on the Bush tax cuts. Not surprisingly given the fact that they pay the most in federal income taxes, the calculations show that high income earners gained the most.
The problem with this is however that it assumes that the incidence of taxation falls entirely on the people from whom taxes are collected. That in turn assumes that taxation has no behavioral effects, which is far from plausible. The evidence instead show that the Bush tax cuts did in fact boost overall economic growth, meaning that more people than those with very high income gained from the tax cuts.
Furthermore, in addition to the boost to real economic activities, lower taxes will other things being equal also reduce tax evasion, meaning that revenue losses will not be nearly as great as a static analysis (one assuming zero behavioral effects) would suggest.
The problem with this is however that it assumes that the incidence of taxation falls entirely on the people from whom taxes are collected. That in turn assumes that taxation has no behavioral effects, which is far from plausible. The evidence instead show that the Bush tax cuts did in fact boost overall economic growth, meaning that more people than those with very high income gained from the tax cuts.
Furthermore, in addition to the boost to real economic activities, lower taxes will other things being equal also reduce tax evasion, meaning that revenue losses will not be nearly as great as a static analysis (one assuming zero behavioral effects) would suggest.
posted by stefankarlsson at 8:45 PM
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