Posts Tagged ‘Politics’

Political Influence on Taxes

30 November 2012

Some interesting graphs today from the NYT:

How the US Tax Burden Has Changed

There’s clearly more variability in the top two income groups, and the most in the top income group.  My intuition tells me this is probably due to the increased influence on the political process that folks at the top have.  One would think that the tax uncertainty can’t be good over the long haul.

Another argument for federally-funded elections?

I have yet to see analysis in the popular press that talks about what taxes would have to look like, given our present level of entitlements and a reasonable defense budget, to generate surpluses in expansions and deficits in recession (based an understanding of what kind of stimulus is typically needed).  Shouldn’t this be the start of the conversation?


Strange Incentives

23 November 2012

The NY Times reports from the budget negotiations that Washington is considering keeping the top marginal rates at 35 percent, but for higher-income folks making that rate apply to all income, just not the marginal dollar earned:

Seeking Ways to Raise Taxes but Leave Tax Rate As Is

This strikes me as pure sophistry.  And it would seem that it also sets up perverse incentives for some range of income, essentially shifting a family’s budget constraint down at the margin where the 35 percent rate applies to all income rather than just on the marginal dollar.

Tax revenue needs to be raised.  Some combination of eliminating certain deductions and changing the marginal rate on those earning over a particular threshold would seem to be the way to do so without creating perverse disincentives.   Treating investment income as regular income would also seem to be a way to level the playing field a bit.

But it would be nice if Congress would at least try being honest with what they’re doing rather than relying on some trick to say they didn’t raise taxes when in fact they did.