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The Futility of Raising Tax Rates, Cato Policy Analysis

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Cato Institute Policy Analysis No. 192: The Futility of Raising Tax Rates April 8, 1993 Bruce Bartlett Bruce Bartlett, former deputy assistant treasury secretary for economic policy, is a visiting fellow at the Cato Institute.

Executive Summary President Clinton has proposed a major increase in federal income tax rates, especially for the rich. His stated reason for that action is that the rich benefited disproportionately from the tax-rate reductions of the 1980s and thus are not  paying their fair share. In fact, lower tax rates in the 1980s led to higher, not lower, revenues from the rich. The top 1  percent of taxpayers ranked by income, for example, paid over 25 percent of all federal income taxes in 1990, compared compare d to less than 18 percent in 1981. The history of tax-rate increases shows that they seldom produce much revenue. Their principal effect is to make higher taxes taxes on the poor and the middle class more palatable. In fact, because of inflation and real growth growth of the economy, in just a few years tax rates originally originally imposed on the rich often apply to those with middl middlee incomes. incomes. The rich, meanwhile, often evade higher rates by making increased use of deductions and other legal tax shelters. Moreover, Moreov er, higher rates tend to encourage Congress Congress to add new deductions deductions to the tax code. The Clinton plan, therefore, is based on false premises and is unlikely to achieve the goal of increasing the tax burden on the wealthy. It will probably lead, instead, to higher taxes on the poor and the middle class, as higher revenues from the rich fail to materialize. materialize. In the end, the burden of higher taxes must must fall largely largely on the middle middle class because because that is where the bulk of income is. Thus, maintaining maintaining a low top tax rate is the best way to ensure that tax rates remain reasonable for those with low and moderate incomes. This website stores data such as Introduction cookies to enable essential site functionality, as well as marketing,

During the 1980sand theanalytics. goal of You tax reformers on both the left and the right was to reduce marginal tax rate ratess as much as personalization,  possible. To ayour large extent, thattime was accomplished. At the beginning of the 1980s, the top marginal income tax rate was may change settings at any 70orpercent; bydefault the end it had fallen to just 28 percent. Moreover, support for low marginal tax rates was so widespread  accept the settings. that virtually every major nation on earth followed the U.S. example and cut marginal tax rates in the 1980s. The following are among the reasons for the cuts. Privacy Policy

--High marginal rates were producing little revenue. Marketing

--High rates led to a proliferat proliferation ion of legal tax deductions, deductions, which created created complexity complexity and distorted economic economic Personalization decisionmaking, as well as encouraged tax evasion. Analytics

--Inflation was pushing many people of moderate means into tax brackets originally intended for the wealthy. Save

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--The growing growing internation international al mobility mobility of both capital and labor put nations with high tax rates at a competitive competitive disadvantage.

 

 Now President P resident Clinton has proposed a reversal of policy in an economic ec onomic program that explicitly raises marginal tax rates.. A new top rate of 36 percent will apply to single individuals rates individuals with incomes above $115,000 and to married  married  couples who file jointly and have incomes above $140,000. In addition, a surtax surtax of 10 percent will apply to individuals with incomes above $250,000, raising the effective top rate to 39.6 percent.[1]

Tax Fairness? It is not entirely clear what the true purpose of Clinton's proposal is; in his original plan, which was part of his campaign, campaig n, he talked only about "forcing the very wealthy to pay their fair share of taxes."[2] taxes."[2] He also expressed  expressed  concern during the during 1980s wealthiest wealthies t 1 percent Americans got 70 percent of income Although Those that "fact" is that not related directly to "the higher taxes, the revenueof figures are included in a section entitledgains." "Tax Fairness." figures indicate that higher tax rates for the top 2 percent of taxpayers, an increase in the Alternative Minimum Tax, and a surtax on millionaires would raise $82.9 billion over four years (1993-96).[3] In the administration's budget document, those revenues are estimated at $96.8 billion between 1994 and 1997.[4] According to the Department of  the Treasury, the proposal "would increase the fairness of the tax system by ensuring that upper income taxpayers pay their fair share of federal income taxes."[5]  None of those rationalizations is a valid justification of higher tax rates. First, it is absurd to say that the rich do not "pay their fair share." The share of federal income taxes paid by those with upper incomes has been rising, rising, not falling. falling. Indeed, the top 1 percent of taxpayers taxpayers now pay more than one-fourth of all federal federal income taxes, as shown in Table 1.

Table 1 Share of Total Federal Income Tax Burden by Adjusted Gross Income Percentile (Percent) Tax Year

Top 1%

Top 5%

Top 10%

Top 25%

50%

1980

19.0

36.8

49.3

73.0

92.9

1981

17.6

35.0

48.0

72.3

92.5

1982

19.0

36.1

48.6

72.5

92.6

1983

20.3

37.3

49.7

73.1

92.8

1984

21.1

38.0

50.6

73.5

92.6

1985

21.8

38.8

51.5

74.1

92.8

1986

25.0

41.8

54.0

75.6

93.4

1987 24.6 43.1 1This 988 website stores 27.data 5 such as45.5

55.5 57.2

76.8 77.8

93.9 94.3

77.4

94.3

77.4

94.4

cookies to enable essential site 25.2 44.0 55.9 functionality, as well as marketing, 1personalization, 990 25.6analytics. You 44.1 55.8 and may change your settings at any time or accept the default settings. Source: Internal Revenue Service, unpublished data.

1989

The second rationalization is also flawed in several ways. First, the statement that the rich got 70 percent of the income Privacy Policy gains in the 1980s is flatly wrong. The source for that assertion was, apparently, a calculation made by Professor Paul Krugman of MIT, which was quoted in the New York Times.[6] According to the Times, Krugman's calculation Marketing showed that that "60 percent of the growth in after-tax income of all American families families between 1977 and 1989--and an Personalization even heftier three-fourths three-fourths of the gain in pretax income-income--went went to the wealthiest wealthiest 660,000 660,000 families, families, each of which had an Analytics

annual income income of at least $310,000 a year, for a family family of four." four." That statement, which Accept appeared Save All in early editions of the Times, implies that 60 percent of the aggregate income growth of all Americans Americans went to the top 1 percent of taxpayers. Had that been the case, it would have meant that the top 1  percent of Americans got 60 percent of $830 billion, which was the increase in aggregate after-tax after- tax family income in

 

the United States between 1977 and 1989. According According to the Congressional Congressional Budget Office, the top 1 percent of  taxpayers taxpaye rs actually got about one -fourth of the increase in aggregate income during that period. period. However, However, the CBO cautionss that even the correct figure can be misleading. caution misleading. The rise in overall overall income says nothing about whether whether the average family family at any point in the income distribution distribution was  better off as a result or how any improvements in well-being well -being were distributed among families. If average family income had not changed, the 27 percent increase in the number of famili families es alone would have increased increased aggregate income by that percentage or about $580 billion; that amounts to more than two-thirds of the total actual increase.[7] In fact, Krugman was talking about average income growth. The Times clarified that point in later editions of the same day, although no comment or correction notice ever appeared. The revised editions stated, "An outsized 60 percent in the average after-tax income of all American American families between between 1977 and 1989--and an even heftier threethree- fourths of  the gain in average pretax income--went to the wealthiest 660,000 families" (emphasis added).[8]

Krugman Analysis Flawed Table 2 Shares of After-Tax Income and Distribution of Changes in Average Income among Income Categories (percent) Krugman

Revised  

Income Category

1977

1989

Gaina

1977

1989

Gaina

Bottom 20 percent

6

4

- 11

6

4

-7

Second 20 percent Middle 20 percent

12 16

10 15

-7 2

11 15

10 15

3 11

Fourth 20 percent

23

22

8

22

21

15

81st to 90th percentiles

16

15

11

16

15

11

91st to 95th percentiles

10

10

10

10

10

8

96th to 99th percentiles

11

12

25

12

13

19

Top 1 percent

7

12

70

8

13

44

Source: Congressional Budget Office, "Measuring the Distribution of Income Gains," CBO staff memorandum, March 1992, pp. 3-4. aShare of gain in average average after-tax income.

This website stores data such as cookies toitenable Krugman, turns essential out, wassite wrong on several points. First, he apparently made a mathematical error in recalculating functionality, as well as marketing, some data originally published by the CBO. According to his methodology, the "correct" figure is 70 percent, rather  personalization, and analytics. You than 60 percent. However, even that number turns out to be wrong because Krugman's methodology failed to adjust for  may change your settings at any time changes in family size over the period. Between 1977 and 1989 average family size declined by 10 percent, with the or accept the default settings.

largest reduction in families in the middle-income quintiles. That is significant because small families need less income than do large families families to maintain a given standard standard of living. living. Table 2 shows the "correct" "correct" data based on Krugman's original methodology and the revised figures adjusted by the CBO for changes in family size. As one can Privacy Policy see, the revised data indicate that the the rich did much less well than Krugman stated stated,, and the poor and the middle class Marketing did much better. Yet, as noted earlier, Governor (now President) Clinton continued to use the incorrect numbers to  justify his case for higher taxes on the rich. Personalization Analytics

Even with all the adjustments, however, the data are still conceptually flawed, insofar as they purport to reflect a redistribu redis tribution tion of income from lower income and middle-income middle-income Americans Americans to the rich. As Michael Boskin, chairman chairman Save Bush's Council Acceptof AllEconomic Advisers, explains: of President Mr. Krugman's calculation bears no relation to how gains from economic growth are distributed. Suppose an economy

 

has two workers with annual incomes of $20,000 and $30,000, respectively. A few years later, these same workers earn $30,000 and $40,000, respectively, and two new workers obtain jobs earning $20,000 each, all figures adjusted for  inflation. Total real income income increased increased by $60,000. One- sixth accrued to the worker now representing representing the top 25 percent of  income earners. earners. One-sixth ac crued to the worker in the next 25 percent of income earners earners.. And two-thirds two-thirds accrued to the bottom 50 percent of earners. Average income increased by $2,500 (from $25,000 to $27,500) while average income in the top half of the distribution increased by $5,000 (from $30,000 to $35,000). Mr. Krugman's calculation of the gain in average income would indicate indicate that people people in the top half accounted for 100 percent percent of the gains from economic growth--of the gain in average incomeincome--even -even though the two original workers workers received equal raises, one moved from the bottom half to the top half of the distribution, and two new workers found jobs and now constitute the bottom half (emphasis in original).[9]

Table 3 Effects of Taxes and Transfer Payments on Household Income by Income Quintile, 1990 Quintile

Before Taxes and Transfers

After Taxes and Transfers

Average Income Lowest

$ 2,096

$10,904

Second

14,664

18,676

Third

28,836

27,017

Fourth

45,836

38,780

Highest

93,966

71,944 Income Share (Percent)

Lowest

1.1

6.5

Second

7.9

11.2

Third

15.5

16.1

Fourth

24.7

23.2

Highest

50.7

43.0

Source: Council of Economic Advisers, Economic Report of the President, 1992 (Washington: U.S. Government This website stores data such as Printing 136. site cookies Office), to enablep. essential functionality, as well as marketing,

It personalization, should also beand noted that the data Krugman used are for money income; thus, the value of all in- kind governme government nt analytics. You transfers, trans such as settings those for Medica public housing, is excluded. Those Those and other transfers, transfers, as well as the tax mayfers, change your at Medicaid any timeid and public system, have substantial effect on income distribution, reducing incomes of the wealthy and increasing those of the or accept the adefault settings.  poor. Table 3 illustrates that effect. Privacy Last, notePolicy that, contrary to Clinton's statement about the 1980s, Krugman was looking at income changes beginning in 1977, well before the beginning of the Reagan Republican era, which Clinton obviously meant to impugn. As the late Marketing Warren Warre n Brookes and others have shown, the common common use of 1977 as a base year for comparison comparison has the effect effect of  making Personalization it appear that the Reagan administration was responsible for declining incomes, rising income inequality, and  the like, when the Carter administration (1977-80) was actually to blame.[10] In fact, the CBO implicitly admits that Analytics  bias, as shown in Table 4. Save

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Table 4 Shares of After-Tax Income and Distribution among Income Categories of 

 

Changes in Average Income (Percent) Income Category

1977- 89a

1980- 89

1985- 89

Bottom 20 percent

-7

-3

2

Second 20 percent

3

3

12

Middle 20 percent

11

11

15

Fourth 20 percent

15

15

12

81st to 90th percentiles

11

14

12

91st to 95th percentiles

8

8

1

96th to 99th percentiles

19

19

13

Top 1 percent

44

38

37

Source: Congressional Budget Office, "Measuring the Distribution of Income Gains," p. 7. aShare of gain in average after-tax after-tax income.

Taxes and Redistribution At this point, one might well ask what the chances are that increas increasing ing the top federal income tax rate--say, on the top 2  percent, those with incomes over $200,000- -will actually achieve the apparent goal of equalizing the distribution of  income. Clearly, Clearly, much redistributio redistribution n already already takes place, place, as indicated indicated in Table 3. But how much more could be achieved achieve d solely on the tax side? History shows that the ability to extract higher revenues from the rich is extremely limited. Higher rates simply cause the rich to shift their income from taxable forms to nontaxable nontaxable forms or to forms that are taxed at a lower rate. The former would include tax-free municipal bonds, the latter capital gains.[11] Other probable effects include increased  use of deductions deductions already in effect, such as business business losses to reduce taxable income, and the growth of tax evasion, evasion,  both of which have h ave been bee n directly related to marginal income tax rates.[12] Additional economic effects include a decline in labor supply as those affected by higher tax rates substitute leisure for  labor by, for example, retiring earlier.[13] They also shift their compensation from wages to nontaxed benefits, such as  pensions and insurance.[14] They shift from wage labor to self -employment, because self-employment self- employment provides greaterr opportunities greate opportunities for tax avoidance avoidance and evasion evasion and because they can incorporate incorporate and thus pay tax at the corporate corporate tax rate if it is lower.[15] In fact, there is strong evidence that the Tax Reform Act of 1986, by reducing the top individual income tax rate below the corporate rate,for encouraged de-incorporation; corporations became  partnerships Subchapter corporations, income both of which is taxed at themany individual rather than the corporate This websiteor stores data suchSas tax rate.[16] Presumably, cookies to enable essentialthe sitereverse effect would occur if Congress raised the top individual rate to 39.6 percent (41  percent on earned income) and set the corporate rate at 36 percent. As a result, the revenue yield from any increase in functionality, as well as marketing, personalization, and analytics. Youless than expected.[17] marginal tax rates would be far may change your settings at any time or accept Figure 1 the default settings.

Top Statutory Income Tax Rate Measures Measur es from 1913-1993 Privacy Policy (Graph Omitted) Marketing

Figure 1 illustrat illustrates es the history history of the top federal income tax rate since inception inception of the tax in 1913. As one can see, the Personalization top rate began at 7 percent, percent, rose sharply during World War I, and peaked at 77 percent in 1918. The top rate fell durin during g the 1920s, reaching a low of 24 percent in 1929, before rising rising steadily during the Roosevelt Roosevelt era. The top rate peaked at Analytics 94 percent at the height of World War II. The World War II rates stayed relatively intact during the 1950s and did not declinee Save declin until the Kennedy-Johnson Kennedy-Johns percent. The Accept All on tax cut of the early 1960s, which brought the top rate down to 70 percent. Reagan tax cuts brought the top rate down to 28 percent.[18] The 1990 budget agreement increased the top rate to 31  percent, where it stands today.[19]

 

Origin of High Rates World War I was a godsend godsend for statists of the time, giving them an excuse to raise raise tax rates far higher than anyone had  imagined they could ever go when the income tax was instituted in 1913. As Princeton historian Arthur Link puts it: "Progressives used the necessity for vastly increased revenues as the occasion for putting their . . . tax theories into effect. The new income and inheritance taxes constituted, for that day, a powerful equalitarian attack on great property, unrivaled even by Lloyd George's 'Tax on Wealth' of 1909."[20] Historian Gerald Carson adds, "World War I built an acceptance for the income tax that might have never existed otherwise."[21] Clearly, wars are the major factors that lead to increases in tax rates and legitimatize tax systems.[22] Even Alexander  Hamilton recognized that. As he told Robert Morris in 1781, "The object of the war . . . would supply the want of  habit, and reconcile the minds of the people to paying to the utmost utmost of their ability."[23] ability."[23] Unfortunately, governments never seem to raise rates temporarily for the duration of a war; instead they impose  permanent tax increases. It is then difficult d ifficult to get tax rates back down to their prewar levels. There are always war  debts to pay, veterans' benefits to pay, and any number of "pressing social needs" that require the maintenance of  wartime tax rates.[24] Albert Gallatin, Thomas Jefferson's treasury secretary, recognized that and urged that all taxes  be temporary because otherwise some new purpose for which to spend the money would always be found.[25] In his 1919 State of the Union message, President Woodrow Wilson recognized that continuation of the wartime tax rates would harm the economy and ultimately reduce government revenues. The Congress Congress might well consider consider whether the higher rates rates of income and profits profits taxes can in peace times be effectively effect ively of productive product of inefficiency. revenue, revenue, andThere whether whethe may not, oninthe contrary, contrary destructive destr uctive of business busine ssprofits activitytaxes and   productive wasteive and israthey point at which peace times, be high rates of income and discourage energy, remove the incentive to new enterprise, encourage extravagant expenditures and produce industrial stagnation with consequent unemployment and other attendant evils.[26] Wilson's treasury secretary, Carter Glass, was equally emphatic about the need for lower taxes. As he stated in his Annual Report for 1919: The upper brackets brackets of the surtax have already passed passed the point of productivity, productivity, and the only consequence consequence of any further increase would be to drive possessors of these great incomes more and more to place their wealth in the billions of dollars of wholly exempt securities heretofore issued and still being issued by States and municipalities, as well as those heretofore issued by the United States. This process not only destroys a source of revenue to the Federal Government, but tends to withdraw the capital of very rich men from the development of new enterprises and place it at the disposal of State and municipal governments upon terms so easy to them (the cost of exemptions from taxation falling more heavily upon theasFederal Government) as to stimulate wasteful and nonproductive expenditure by State This website stores data such and municipal governments.[27] cookies to enable essential site functionality, as well as marketing,

Throughout 1920and theanalytics. Wilson You administration pressed hard for tax reduction, especially of surtaxes, emphasizing that personalization, high ratessettings were actually reducing the government's revenue.[28] However, then as now, congressional maywartime change your at any time Democrats were obsessed with holding on to as much of the people's income as possible, the better to spend it or accept the default settings. themselves. It was also argued that high statutory tax rates were necessary for reasons of "fairness." As a result, no action was taken, and Republican Warren G. Harding was elected president in 1920, and Republicans picked up many Privacy Policy House and Senate seats. In his inaugural address, Harding said that his highest priority was the reduction of wartime tax rates,Marketing "which have become unproductive unproductive and are so artificial artificial and burdensome burdensome as to defeat their own purpose."[29] purpose."[29] Personalization During the 1920s tax rates were cut massively, with the amazing result that revenues actually increased, especially from theAnalytics wealthy.[30] That was due to the vast expansion of the tax base as a result wealthy.[30] result of the general economic expansion expansion of the 1920s that was caused largely by the tax cuts.[31] Table 5 presents data on that point. Save

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Table 5 Federal Income Tax Revenue by Income Class, 1921 and 1926

 

Revenue Collected a

Percent of Total

Income Class

1921

1926

1921

1926

Less than $10,000

155.1

32.5

22.5

4.6

$10,000 - $25,000

121.8

70.3

17.6

9.9

$25,000 - $50,000

108.3

109.4

15.7

15.4

$50,000 - $100,000

111.1

136.6

16.1

19.2

Over $100,000

194.0

361.5

28.1

50.9

Total

690.2

710.2

100.0

100.0

Source: James James Gwartney Gwartney and Richard Richard Stroup, "Tax Cuts: Who Shoulders Shoulders the Burden?" Burden? " Federal Reserve Bank of  Atlanta Economic Review, March 1982, p. 25. aMillions of constant 1929 dollars.

The Roosevelt Era The onset of the Great Depression in 1929 led to a sharp decline in tax revenues, as the economy contracted. President Herbert Hoover's response was to push for a major tax increase. The Revenue Act of 1932 raised tax rates across the  board, with the top rate rising from 25 percent to 63 percent. That increase was justified on the grounds that the budget needed to be balanced to restore business confidence. Yet the $462 million deficit of 1931 jumped to $2.7 billion by 1932 despite the tax increase. Interestingly, the major cause of the deficit's rise was a sharp decline in income tax revenue,, which fell from $1.15 billion in 1930 to $834 million revenue million in 1931, $427 million million in 1932, and just $353 million million in 1933. Moreover, Moreover, as Table 6 demon- strates, strates, the higher tax rates on the wealthy actually actually caused the tax burden to be shifted to the nonwealthy.

Table 6 Federal Income Tax Revenue by Income Class, 1931 and 1932 Revenue Collected a

Percent of Total

Income Class

1931

1932

1931

1932

Less than $25,000

51.6

134.0

21.0

36.5

$25,000 - $50,000

40.1

48.1

16.3

13.0

$50,000 - $100,000

44.8

51.7

18.2

14.1

$This 100,website 000 - $stores 300,00data 0 such as 51.9

66.2

21.1

18.0

cookies to enable essential site Over $300,000 57.8 67.4 23.5 18.4 functionality, as well as marketing, personalization, and analytics. You Source: Jamesyour James Gwartney and Richard Shoulders the Burden?" Burden? " p. 27. may change settings at anyRichar time d Stroup, "Tax Cuts: Who Shoulders or accept the default settings.

aMillions of constant 1931 dollars. Privacy Policy Economists today recognize Hoover's tax increase as a terrible blunder, which deepened and prolonged the depression.[32] In the 1932 campaign Franklin D. Roosevelt attacked Hoover for his error. In a speech in Pittsburgh on OctoberMarketing 19, for example, Roosevelt blamed the economic malaise on Hoover's tax policy. Personalization

Taxes are paid in the sweat of every man who labors because they are a burden on production production and are paid through Analytics

 production. If those taxes are excessive, they are reflected in idle factories, in tax- sold farms, and in hordes of hungry  people, tramping the streets and seeking jobs in vain. Our workers may never neve r see a tax bill, but they pay. They Th ey pay in Save Accept All deductions deducti ons from wages, in increased cost of what they buy, or--as now--in broad unemployment unemployment throughout throughout the land. There is not an unemployed unemployed man, there is not a struggling struggling farmer, farmer, whose interest interest in this subject is not direct and vital. It comes home to every one of us![33]

 

Upon taking office, however, Roosevelt made no effort to reduce taxes but instead pressed for still higher rates on the rich. The 1935 tax bill, in particular, was especially aimed at the very wealthy, despite strong reservations on the part of Roosevelt's advisers that the result would be a deepening of the depression.[34] In the end, the top rate was raised to 79 percent, percent, estate taxes were were raised, raised, and a wide variety of other taxes increased increased as well. HowHow - ever, altogether the the bill raised just $250 million.[35] In fact, it was said that only one person in America, John D. Rockefeller, actually paid  any tax at the top rate.[36] rate.[36] The limited impact of the 1935 tax bill in terms of dollars, however, greatly understates its significance. Joseph Schumpeter, for one, believed that the advent of "taxation for taxation's sake and regardless of insignificance of results for the Treasury" a few years,That haveand a seriously negative on eventually the economy.[37] fact, the U.S. economy sufferedwould, suffered a sharpwithin setback setback in 1937. Democratic Democratic losses losseseffect in 1938 event ually led to aIn scale-back of overt "soak-the-rich" tax policies. However, rather than cut rates, Congress expanded tax shelters, thus mitigating much of  the redistributive impact of earlier tax bills.[38] The onset of World War II led to a further further increase in tax rates. Of much greater greater significance, significance, however, was the fact that the vast bulk of the population was required required to pay income taxes. Before Before World War II, the federal federal income tax had   been a very ve ry limited tax-tax --on on the eve of war fewer than 14 percent of workers even filed returns. By the end of the war, three-quarters of all workers did so. As noted earlier, wartime tax rates tend not to be reduced afterward. Such was the case with the World War II rates. President Harry S Truman fought the Republican Congress in 1947 and 1948 to prevent any reduction in tax rates. Although Althou gh modest cuts were final finally ly enacted over his veto, they proved to be short-lived, short-lived, as the onset of the Korean conflict in 1950 again required an increase in taxes.

Eisenhower and Kennedy With the election of Republican Dwight D. Eisenhower as president and a Republican Congress in 1952, a golden opportunity to cut the wartime tax rates was created. Unfortunately, Eisenhower believed that taxes could not be cut until the budget was balanced. "We cannot afford to reduce taxes, taxes, reduce income," he said, "unti "untill we have in sight a  program of expenditure that shows that the factors of income and an d outgo will be balanced."[39] ba lanced."[39] Although Eisenhower's sentiment was admirable, losses in the 1954 election cost the Republicans control of Congress. The return of Democratic Democratic control control meant that any chance of reducing reducing wartime wartime tax rates was lost for the balance of the 1950s. It took the election of a Democratic president in 1960 to finally bring that about. Eisenhower's fiscal conservatism carried a heavy price. There were three recessions during his administration--July 1953 through May 1954, August 1957 through April 1958, and April 1960 through February 1961--and real growth of  This website stores product data suchaveraged as the gross domestic just 2.5 percent over those eight years. In large part, that sluggish growth was due cookies to enable essential site to high tax rates, rates, not just on the wealthy wealthy but on the middle class as well. In fact, as Figure 2 shows, shows, increasing increasing tax rates functionality, as well as marketing, on the wealthy led to increases in tax rates on middle-class incomes (defined as $50,000 for a family family of four in 1992) personalization, and analytics. You asmay well.[40] change your settings at any time or accept the default settings.

Thus, Democrat Democrat John F. Kennedy was able able to run as the candidate candidate of growth growth in 1960, prom promising ising to "get the economy moving again." Republican Richard M. Nixon, saddled with the legacy of slow growth during the Eisenhower years,  paid the price, Privacy Policy loss of a close election. Figure 2Marketing Increases in Top Rates Lead to Higher Rates on Middle-Class Incomes2 Personalization  Note: Middle-Class Middle -Class income is defined as $50,000 $50 ,000 for a family of four in 1992.2 Analytics

(Graph Omitted) Save Accept All Kennedy understood, as understood, Eisenhower had not, that tax cuts have a better chance of bringing about a balance balanced d budget than does the continuation of confiscatory wartime tax rates. He spelled that out in a speech before the Economic Club of New York on December 14, 1962.

 

Our true choice is not between tax reduction, reduction, on the one hand, and the avoidance of large Federal deficits deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenue to balance our budget, just as it will never produce enough jobs or enough profits. profits. Surely the lesson of the last decade is that budget deficits deficits are not caused   by wild-eyed wild- eyed spenders, but by slow economic growth and periodic recessions, and any new n ew recession would break all deficit records. In short, it is a paradoxical paradoxical truth truth that tax rates are too high today and tax revenues ar aree too low, and the soundest way to raise the revenue in the long run is to cut the rates now. The experience of a number of European countr countries ies and Japan has borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. employment. The purpose purpose of  cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can  bring about budget budge t surplus. I repeat: repeat: our practical practical choice is not betwee between n a tax-cut deficit and budgetary budgetary surplus. surplus. It is between two kinds of deficits: deficits: a chronic chronic deficit of inertia, inertia, as the unwanted result of inadequate revenues and a restricted restricted economy; or a temporary temporary deficitt of transition, defici transition, resulting resulting from a tax cut designed to boost the economy, economy, increase tax revenues, and achieve--and I  believe this can be done-done --aa budget bu dget surplus. The Th e first type of deficit is a sign of waste and weakness; the second  reflects refle cts an investment investment in the future.[41] future.[41] On January 24, 1963, Kennedy sent his tax cut proposal to Congress. It called for reducing the top marginal income tax rate from from 91 percent to 70 percent, reducing the lowest in income come tax rate from from 20 percent to 14 percent, and cutting cutting the corporate income tax rate from 52 percent to 47 percent.[42] Interestingly, Kennedy's tax plan was opposed by some of  his more liberal advisers, such as John Kenneth Galbraith.[43] They favored stimulating the economy by increasing government spending. But Kennedy held firm, not just on the need for tax cuts, but on cuts in marginal tax rates. Although he did not live to see his proposal enacted into law, Kennedy's plan passed Congress essentially as proposed  in early 1964. Subsequent analysis strongly indicates that, as Kennedy believed it would, the tax cut led to an increase in federal revenue, especially from the rich, and a significant increase in economic growth.[44] The data in Tables 7 and 8 support that view. Unfortunately, the positive economic effects of the Kennedy tax cut were not long-lived. The outbreak of inflation in the late 1960s pushed people into higher tax brackets and thus increas increased ed average marginal tax rates. Figure 3 shows the relentless growth of the average marginal tax rate for all taxpayers.[45]

Table 7 Estimated and Actual Federal Receipts, 1964-67 ($ Billions) This website stores data such as Ycookies ear to enable Estiessential mated site Actual Difference as 1functionality, 964 $1well 09.3as marketing,

personalization, and analytics. You 1may 965 change your 115settings .9 at any time the default 1or 96accept 6 119.8 settings.

$112.7

+$3.4

116.8

+0.9

130.9

+11.1

1967

149.6

+8.2

141.4

Privacy Policy

Source: Congressional Budget Office, A Review of the Accuracy of Treasury Revenue Forecasts, 1963-1978 Marketing (Washington: U.S. Government Printing Office, February 1981), p. 4. Personalization

Table 8 Tax Revenue from the Wealthy, 1961-66 ($ Millions) IncomeSave Class 1961 1962 1963 1964 Accept All

1965

$100,000 - $500,000

2,752

Analytics

1,970

1,740

1,890

2,220

$500,000 $1 million

297

243

243

306

408

Over $1 million

342

311

326

427

603

 

Source: Michael K. Evans, The Truth about Supply-Side Economics (New York: Basic Books, 1983), p. 199. Despite few legislated tax increases during the late 1960s and 1970s, rising inflation and lack of indexing meant that higher nominal incomes pushed taxpayers into higher and higher tax brackets. The result was, as theory predicts, an increase in tax evasion and avoidance, which shrank the tax base.[46] For that reason, many economists predicted that a cut in tax rates had the potential potential to expand the tax base by reducing the the incentive to evade or avoid taxation taxation and  thereby increasing government revenue. Although the notion that a tax cut might increase revenue is often derided Although derided,, we have already already seen evidence from the 1920s and 1960s that tax cuts do, indeed, increase revenue. Conversely, tax increases may lose revenue. As John Maynard Keynes put it: Figure 3 Averagee Marginal Averag Marginal Tax Rate, 1916-83 Source: Barro and Sahasakul (Graph Omitted)  Nor should the argument seem strange that taxation may be so high as to defeat its object, and an d that, given sufficient time to gather the fruits, fruits, a reduction reduction of taxation taxation will run a better chance chance than an increase of balancing balancing the budget. budget. For  to take the opposite view today is to resemble a manufacturer manufacturer who, running at a loss, decides decides to raise his price, and  when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more--and who, when at last his account is balanced with nought on both sides, is still found righteously declaring that it would have been the act of a gambler to reduce the price when you were already making a loss.[47] When Ronald Reagan was elected president in 1980, his principal campaign promise was to cut tax rates. In 1981 that  promise was fulfilled, and the top marginal income tax rate was reduced from 70 percent- -where it had been b een since Kennedy's day--to 50 percent. Taxpayers in other tax brackets received similar rate reductions. Although it is often asserted that the Reagan administration predicted an increase in revenue from that tax cut, all revenue figures released   by the Reagan administration followed standard revenue-estimating revenue- estimating procedures, which assumed a dollar of revenue loss for every dollar of tax "cut."[48] Nevertheless, considerable research has been done on the revenue effects of the Reagan program, program, including the effects of the Tax Reform Act of 1986, which lowered the top rate from 50 percent to 28 percent, and there is strong evidence that revenues from the wealthy did, indeed, increase.[49] Although the stores Clinton administration assumes substantial revenues will be generated by an increase in the top rate, as This website data such as did, the evidence from theory and history strongly suggests that projected revenue Clinton's campaign documents cookies to enable targets will not beessential met. Notsite only will a higher top rate encourage tax evasion and avoidance, but higher tax rates will functionality, as well as marketing, raise the cost of capital, thus lowering investment and increasing unemployment in the long run. Recent analyses of  personalization, and analytics. You Clinton's campaign proposals support that view.[50] As a consequence, it is now widely reported that higher tax rates may change your settings at any time for richthe may not settings. necessarily raise much revenue.[51] or the accept default

Conclusion Privacy Policy

President Clinton's proposal to raise taxes on the rich is based on false premises: Marketing

The richPersonalization got richer in the 1980s at the expense of the poor and the middle class. class. Analytics

That was the result of Reagan's tax cuts, which also caused revenue from the wealthy to fall. Higher tax rates will both increase Save Accept All government revenue from the rich and redistribute income from the rich to the poor  and the middle middle class. class.

 

In fact, the rich did not getter richer at the expense expense of anyone. All income classes benefited benefited from the prosperity of the 1980s. Moreover, Moreover, the data on which Clinton has relie relied d to support his proposal proposal are deeply flawed. In addition, authoritative data from the Internal Revenue Service clearly demonstrate that the tax cuts of the 1980s led  to higher, not lower, revenues from the rich. Both logic and the experience of history strongly suggest that the opposite result would occur if tax rates were increased. Last, there is no evidence that higher taxes on the rich would do anything to benefit the economic position of the poor  and the middle class. On the contrary, there is strong evidence that higher taxes on the rich would eventually lead to higher taxes on the middle class.

Notes [1] Actually, Actually, the top rate on earned income (wages and sala ries) ries) would be even higher because Clinton Clinton has proposed  eliminating the current $135,000 cap on the 1.45 percent Medicare tax. Thus, for earned income, the top rate would be over 41 percent. Moreover, for married couples filing separately, the threshold for the surtax would be only $125,000. [2] Bill Clinton and Al Gore, Putting Putting People First: How We Can All Change America (New York: Times Books, Books, 1992), p. 4. [3] Ibid., p. 31. [4] Office of Management and Budget, A Vision of Change for America (Washington: U.S. Government Printing Office, 1993), p. 139. [5] Department of the Treasury, Summary of the Administra tion's Revenue Proposals (Washington: Department of the Treasury, 1993), p. 34. [6] Sylvia Nasar, "Even among the Well-Off, the Richest Get Richer," New York Times, March 5, 1992. It was later re  ported that when Clinton saw that figure in the Times, he "went crazy," according to his press secretary Dee Dee De e Myers. See Sylvia Nasar, "However You Slice the Data the Richest Did Get Richer," New York Times, May 11, 1992. [7] Congressional Budget Office, "Measuring the Distribution of Income Gains," CBO staff memorandum, March 1992, p. 2. [8] The first quote appeared in editions of the New York Times distributed in the Washington area. The second quote is from the article as it now appears in a Nexis printout. Subsequently, Krugman published several articles explaining what had said ordata meant toassay in the first place. See Paul Krugma Krugman, n, "Disparity "Disparity and Despair," Despair," U.S. News & World  Thishe website Report, Marchstores 23, 1992,such pp. 54-55; idem, "Ignorance and Inequality," U.S. News & World Report, June 1, 1992, pp. cookies to enable site the Rich, and the Facts," 4849; and idem,essential "The "The Right, Facts," American Prospect, no. 11 (Fall 1992): 19-31.

functionality, as well as marketing, personalization, and analytics. You [9] Michael Boskin, Boskin, Letter to the editor, editor, Wall Street Journal, July 3, 1992. may change your settings at any time or accept the default settings.

[10] See Warren Brookes, Brookes, "Hiding a Boom in a Statistica Statisticall Bust," Bust," Wall Street Journal, August 6, 1987; and idem, "Try "Try ing to Blame Carter on Reagan," Washington Times, February 8, 1988. The Clinton administration is continuing the fraud; seePolicy Office of Management Management and Budget, pp. 7, 18. Privacy [11] Throughout Throug hout most of U.S. history, history, capital gains have been taxed at a lower rate than ordi ordinary nary income. It is widely Marketing  believed that tha t the differential was abolished ab olished by the Tax Reform Act of 1986. However, the 1990 budget agreement, Personalization which raised the top income tax rate from 28 percent to 31 percent, percent, fixed the maximum maximum capital gains gains tax at 28 percent. percent. Analytics

Even smallordinary increase,income however, beengains. enough to moti activity by individuals in effect,that convert intohas capital That trendvate willtax-shelter certainly accelerate inwealthy the future, given thewho, Clinton Save Accept All the maximum capi tal gains tax rate at 28 percent. administration's proposal to keep [12] See James Long, "Tax Rates and Tax Losses: A Preliminary Analysis Using Aggregate Data," Public Finance

 

Quarterly 12, no. 4 (October 1984): 457-72; Charles Clotfelter, "Tax Eva sion and Tax Rates: An Analysis of  Individual Returns," Review of Economics and Statistics 65, no. 3 (August 1983): 363-73; Roger Waud, "Tax Aversion and the Laffer Curve," Scottish Journal of Political Economy 33, no. 3 (August 1986): 213-27; Richard  McKenzie, McKenzi e, "The Micro and Macro Eco nomic Effects Effects of Changes in the Statutory Statutory Tax Rates," Review of Social Economy 31, no. 1 (April (April 1973): 20-30; James Alm, Roy Bahl, and Matthew Matthew N. Murray, "Tax Structure Structure and Tax Compliance," Review of Economics and Statistics 72, no. 4 (November 1990): 603-13; and Steven Crane and Farrokh  Nourzad, "Tax Rates and Tax Evasion: Evidence from Califor nia Amnesty Amne sty Data," National Tax Journal 43, no. 2 (June 1990): 189-99. [13] Jerry Hausman, "Labor Supply," in How Taxes Affect Eco nomic Behavior, ed. Henry Aaron and Joseph A. Pechman (Wash (Wash ington: Brookings Instituti Institution, on, 1981), pp. 27-64; and Harvey Rosen, "What Is Labor Supply and Do Taxes Affect It?" Ameri can Economic Review 70, no. 2 (May 1980): 171-76. [14] James E. Long and Frank Scott, "The Income Tax and Nonwage Compensation, Compensation,"" Review of Economics and  Statistics 64, no. 2 (May 1982): 211-19; Stephen A. Woodbury, "Substi tution between Wage and Nonwage Benefits," American Ameri can Economic Economic Review 73, no. 1 (March 1983): 166-82; James E. Long and Frank A. Scott, Jr., Jr., "The Impact of  the 1981 Tax Act on Fringe Benefits and Federal Tax Revenues," National Tax Journal 37, no. 2 (June 1984): 185-94; and Frank Sloan and Killard Killard W. Adamache, Adamache, "Taxation and the Growth of Nonwage Compensati Compensation," on," Public Finance Finance Quarterly 14, no. 2 (April 1986): 115-37. [15] James E. Long, "Income "Income Taxation and the Allocation Allocation of Market Labor," Journal Journal of Labor Research Research 3, no. 3 (Summer 1982): 259-76. [16] Roger H. Gordononal and Form," Jeffrey in K.Do Mackie-Mason, "Effects the Tax Reform Act of 1986 on Corporate Financial Policy and Organizational Organizati Taxes Matter? ed. JoelofSlemrod Slemr od (Cambridge, Mass.: Mass. : MIT Press, 1990), pp. 91-131; Myron S. Scholes and Mark A. Wolfson, Wolfson, "The Role of Tax Rules in the Recent Restructuring Restructuring of U.S. Corporations Corpor ations," ," in Tax Policy and the Economy, vol. 5, ed. David Bradford (Cambridge (Cambridge,, Mass.: Mass.: MIT Press, Press, 1991), pp. 1-24; James M. Poterba, "Why Didn't Didn't the Tax Reform Act of 1986 Raise Corporate Corporate Taxes?" in Tax Policy and the Economy,, vol. 6, ed. James M. Poterba Economy Poterba (Cambridge, (Cambridge, Mass.: MIT Press, Press, 1992), pp. 43-58. 43- 58. [17] Edgar K. Browning, "Elasticities, Tax Rates, and Tax Revenue," National Tax Journal 42, no. 1 (March 1989): 4558. [18] Due to the phase-out of some deductions, some people paid a marginal marginal rate of 33 percent. percent. However, However, for those with the highest incomes, 28 percent was the top rate. [19] Although 31 percent is the top statutory rate, because of anomalies in the interaction of various features of the tax code, people actually actual percent federal federal income tax on each additional additional (marginal) (marginal) dollar  dollar  This some website stores may data such asly pay as much as 52 percent earned, to some site experts. See Philip J. Harmelink and Phyllis V. Copeland, "'Hidden Taxes' through cookiesaccording to enable essential Phaseouts andasFloors: functionality, well as Assessment marketing, and Policy Implications," Tax Notes, January 4, 1993, p. 83. personalization, and analytics. You

[20] Woodrow Wilson mayArthur changeLink, your settings at any time and the Progressive Era, 1910-1917 (1954; reprint, New York: Harper  or accept the1963), default pp. settings. Torchbooks, Torchbo oks, 195-96. [21] Gerald Carson, The Golden Egg: The Personal Income Tax, Where It Came From, How It Grew (Boston: Privacy Policy Houghton Mifflin, 1977), p. 106. Marketing

[22] See Edward Ames and Richard Richard T. Rapp, "The Birth and Death of Taxes: A Hypoth Hypothesis, esis,"" Journal of Economic Economic History Personalization 37, no. 1 (March 1977): 161-78; C. Northcote Parkinson, The Law and the Profits (Boston: Houghton Mifflin, 1960), pp. 38-50; and Bruce D. Porter, "Parkinson's Law Revisited: War and the Growth of American Government," Analytics

Public Interest, no. 60 (Summer 1980): 50-68. Save Accept All [23] Quoted in Dall W. Forsythe, Forsythe, Taxation Taxation and Political Political Change in the Young Nation, 1781-1833 (New York: Columbia University Press, 1977), p. 51.

 

[24] The Democrats on the House Ways and Means Committee, for example, colorfully described their opposition to the tax reduction reduction bill of 1921 as follows: What an impregnable position position would would it be and what an appeal it would would make to the sense of right and justice justice of the  people for the Democrats to take the position that not a dollar of taxes should be reduced on these profiteering corpora tions and on the millionaires and multimillion aires that reaped harvests of wealth during the war, as long as there is a singlee disabled or wounded soldier singl soldier or a single single widow or orphan of a dead soldier or a singl singlee veteran in need (emphasis (emphasis in original). In U.S. Congress, House of Representatives, "Minority Views," Report no. 350, part 2, 67th Cong., 1st sess., p. 4. [25] Quoted in Forsythe, p. 53. [26] Congressional Record, 66th Cong., 2d sess., December 2, 1919, vol. 59, part 1, p. 53. [27] Annual Report of the Secretary of the Treasury Treasury on the State of the Finances, for the Fiscal Year Ended June 30, 1919 (Washington: U.S. Government Printing Office, 1920), p. 24. [28] See Annual Report of the Secretary of the Treasury on the State of the Finances, for the Fisc Fiscal al Year Ended June 30, 1920 (Washington: U.S. Government Printing Office, 1921), pp. 25-47. [29] Congressional Record (April 12, 1921), p. 170. [30] For details, see Randolph E. Paul, Taxation in the United States (Boston: Little, Brown, 1954), pp. 131-42; John F. Witte, The Politics and Development of the Federal Income Tax (Madison: University of Wisconsin Press, 1985),  pp. 88-96. Interestingly, one historian has concluded that the Republican tax policies of the 1920s were based essen tially on proposals generated by Wilson's Treasury Depart ment. Thus, at least at the presidential level, there was far  more continuity on tax policy between Wilson and the subsequent Harding, Coolidge, and Hoover administrations than is commonly believed. believed. See Lawrence Lawrence L. Murray, "Bureau "Bureau cracy and Bi-partisanship Bi-partisanship in Taxation: Taxation: The Mellon Plan Re visited," Business History Review 52, no. 2 (Summer 1978): 200-25. [31] Robert B. Ekelund, Jr., and Mark Thornton, "Schumpeterian Analysis, Supply-Side Economics and  Macroeconomic Policy in the 1920s," Review of Social Economy 44, no. 3 (December 1986): 221-37. See also Benjamin G. Rader, "Fed eral Taxation in the 1920s: A Re-examination," Historian 33, no. 3 (May 1971): 415-35. [32] E. Carey Brown, "Fiscal Policy in the 'Thirties: A Reap praisal," American Economic Review 46, no. 5 (December 1956): 857-79; and Herbert Stein, The Fiscal Revolution in America (Chicago: University of Chicago Press, 1969), stores pp. 26-38. This website data such as cookies to enable essential site [33] The Public Papers and Addresses of Franklin D. Roose velt, vol. 1, The Genesi Genesiss of the New Deal, 1928-1932 functionality, as well as marketing, (New York: Random House, 1938), p. 798. personalization, and analytics. You may change your settings at any time [34] Raymond Moley, After Seven Years (New York: Harper & Brothers, 1939), pp. 310-11. or accept the default settings.

[35] Roy G. Blakey and Gladys C. Blakey, "The Revenue Act of 1935," American American Economic Review 25, no. 4 (December 1935): 676. Privacy Policy Marketing [36] Mark Leff, The Limits of Symbolic Reform: The New Deal and Taxation, 1933-1939 (New York: Cambridge University Press, 1984), p. 145. Personalization Analytics [37] Joseph A. Schumpeter, Business Cycles, 2 vols. (New

York: McGraw-Hill, 1939), Save Acceptvol. All 2, p. 1039. [38] Thomas M. Renaghan, "Distributional Effects of Federal Tax Policy, 1929-1939," Explorations in Economic

History 21, no. 1 (January 1984): 50-56.

 

[39] Public Papers of the Presidents of the United States: Dwight Eisenhower, 1953 (Washington: U.S. Government Print ing Office, 1960), p. 12. [40] As F. A. Hayek has argued, the main purpose of high statutory tax rates on the wealthy is to justify higher tax rates on the masses than they would otherwise be willing to tolerate. Hayek, The Constitution of Liberty (Chicago: University of Chicago Press, 1960), p. 311. [41] Public Papers and Addresses of the Presidents of the United States: John F. Kennedy, 1962 (Washington: U.S. Government Printing Office, 1963), pp. 879-80. See also Eco nomic Report of the President, 1963 (Washington: U.S. Gov ernment Printing Office, 1963), p. xiv. [42] Public Papers and Addresses of the Presidents of the United States: John F. Kennedy, 1963 (Washington: U.S. Government Printing Office, 1964), pp. 73-92. [43] Arthur Schlesinger, A Thousand Days (Boston: Houghton Mifflin, 1965), pp. 648-50, 1003-4; John Kenneth Galbraith, Ambassador's Journal (Boston: Houghton Mifflin, 1969), p. 381; and Otto Eckstein, "The Economics of the 1960's--A Backward Look," Public Interest, no. 19 (Spring 1970): 89-90. [44] Among the many economic analyses of the Kennedy tax cut are the following: Council of Economic Advisers, Economic Report of the President, 1965 (Washington: U.S. Government Printing Office, 1965), pp. 65-66; Arthur M. Okun, "Measuring the Impact of the 1964 Tax Reduction," in Perspectives on Economic Growth, ed. Walter W. Heller  (New York: Random House, 1968), pp. 25-49; Lawrence Lawrence R. Klein, "Econometric "Econometric Analysis of the Tax Cut of 1964," in The Brookings Brookings Model: Some Further Further Results, Results, ed. James S. Duesenberry Duesenberry et al. (Chi cago: Rand McNally, 1969), pp. 459-72; U.S. Congress, House Committee on the Budget, Joint Economic Committee, and Con gressional Research Service, Economic Stabilization Poli cies: The Historical Record, 1962-76, Joint Committee Print, 95th Cong., 1st sess. (Washington: U.S. Government Printing Office, 1978), pp. 6-9, 15-19, 70-91; and Victor A. Canto, Douglas Joines, and Robert Webb, "The Revenue Effects of the Kennedy Tax Cuts," in Foundation Foundationss of Supply-Side Economics: Economics: Theory and Evidence, ed. Victor A. Canto, Douglas Joines, and Arthur Laffer (New York: Academic Press, 1983), pp. 72-103. [45] Data are for the income tax only and are taken from Robert J. Barro and Chaipat Sahasakul Sahasakul,, "Average Marginal Marginal Tax Rates from Social Security and the Individual Income Tax," Journal of Business 59, no. 4, part 1 (October 1986): 562-63. [46] James D. Gwartney Gwartney and Richard Richard Stroup, "Marginal "Marginal Tax Rates, Tax Avoidance, Avoidance, and the Reagan Tax Cut," in Supply- Side Economics in the 1980s: Conference Proceedings (Westport, Conn.: Quorum Books, 1982), pp. 197-209. This website stores data such as

[47] The to Collected Writings cookies enable essential siteof John Maynard Keynes, vol. 9, Essays in Persuasion (London: Macmillan, 1972), p. 338. functionality, as well as marketing,

[48] See White House, A Program personalization, and analytics. You for Economic Recovery (Wash ington: U.S. Government Printing Office, February 18, 1981), p. your 7. settings at any time may change or accept the default settings.

[49] Daniel R. Feenberg and James M. Poterba, Poterba, "Income In equality equality and the Incomes of Very High Income Income Taxpayers: Taxpayers: Evidence from Tax Returns," Working Paper no. 4229, National Bureau of Economic Research, Washington, Privacy Policy December 1992; Lawrence B. Lindsey, The Growth Experiment (New York: Basic Books, 1990); U.S. Congress, Joint Economic Committee, Fair ness and the Reagan Tax Cuts, 98th Cong., 2d sess. (Washing ton: U.S. Government Marketing Printing Office, 1984); and U.S. Con gress, Joint Economic Committee, Tax Reform, Tax Rates, and Tax Revenues, Personalization 99th Cong., 1st sess. (Washington: U.S. Gov ernment Printing Office, 1985). Analytics

[50] Even the Joint Committee on Taxation, which is con trolled by the Democratic majority of Congress, has estimated estim ated much lower revenues revenues from raising the top rate than has the Clint Clinton on Treasury. Treasury. See David Rogers, "Revised  Save Accept All Figures on Deficit Spur Search for Cuts," Wall Street Journal, March 4, 1993; and Eric Pianin and Steven Mufson, "Clinton Economic Plan Gains Support," Washington Post, March 4, 1993. See also Aldona Robbins and Gary Robbins, "Bill Clinton's Eco nomic Plan," Policy Backgrounder no. 120, National Center for Policy Analysis, Dallas,

 

1992; and Republican Staff, Joint Economic Committee, "Putting People Out of Work: First-Year Growth and  Employment Effects of the Clinton Economic Plan," August 1992, Mimeographed. [51] Sylvia Nasar, "Tapping the Rich May Prove Tricky," New York Times, December 12, 1992; and Brett Fromson and John Mintz, "The Hitch in Taxing the Rich," Washington Washington Post, November 29, 1992.

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