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Tuesday, October 17, 2006

WSJ: U.S. Should Raise/Lower Tax Rate

Interesting juxtaposition of articles from the news and editorial pages in the Wall Street Journal:

Over the last couple decades, the federal government has virtually abolished taxation of a wide swath of people with smallish incomes. This was a mistake, because we need all the tax revenue we can get. It's inefficient to have low marginal tax rates on low incomes, because people with upper middle incomes and high incomes get the same breaks, but they don't get any incentive to work harder. What you want to do is give tax breaks that give people an incentive to earn income that would not otherwise be earned. So in my view, President Bush should have restored the taxes on the low-income people rather than lowering the taxes on the high-income people.

As long as the tax rates are low, the economy will do just fine.

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Comments

"it's inefficient to have low marginal tax rates on low incomes, because people with upper middle incomes and high incomes get the same breaks, but they don't get any incentive to work harder"

Hmmm. Didn't the 86 act originally have some type of "phase out" of the benefits of being in a lower tax bracket. I agree it doesn't make sense to tax any portion of a millionaire's wage income at 10% (and perhaps a phase-out can be instituted), but removing the 10% bracket for poors seems a bit cruel.

Posted by: andy | Oct 18, 2006 12:03:25 AM