It would be a huge mistake to imagine that the cumulative, cascading burden of many tax rates on the same income will leave the middle class untouched. Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO's projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages. At the margin, virtually everyone would be working primarily for the government, reduced to a minority partner in their own labor.
That is such an astonishing lie, it deserves to be said again just how hollow and pathetic the Wall Street Journal has become since Rupert Murdoch took over. The reality is only the top $23,500 would be taxed at 25%, the rest would be much lower. At the state level, only the top $13,000 if that teacher's income would be taxed at 9.5%, again the rest much lower...and then there's deductions to lower the taxable income ever further.
Then Boskin goes on to make up numbers that would raise tax rates well above where they were during the Clinton years on all Americans, which is not what Democrats are proposing at all. Boskin is assuming Laffer Curve idiocy which will lower revenues and require higher tax rates on everyone to meet a balanced budget.
He then throws out this whopper:
Some argue the U.S. economy can easily bear higher pre-Reagan tax rates. They point to the 1930s-1950s, when top marginal rates were between 79% and 94%, or the Carter-era 1970s, when the top rate was about 70%. But those rates applied to a much smaller fraction of taxpayers and kicked in at much higher income levels relative to today.
There were also greater opportunities for sheltering income from the income tax. The lower marginal tax rates in the 1980s led to the best quarter-century of economic performance in American history. Large increases in tax rates are a recipe for economic stagnation, socioeconomic ossification, and the loss of American global competitiveness and leadership.
Professor Richard Green at USC puts that lie to bed:
This didn't seem right to me, so I went to the National Income and Products Account web site. For GDP growth after 1947 (the beginning of the quarterly NIPA data), the best 25 year period was between the first quarter of 1949 and the last quarter of 1973, when the economy grew by a multiple of 2.68. This is well before Reagan took office. The period of 25-year spells after Reagan took office is small, but the best period is the fourth quarter of 1982 until the third quarter of 2007, when the economy grew by a multiple of 2.26.
The top marginal tax rate from 1951 to 1964? 90%. The top marginal corporate tax rate? Around 50%. In other words, we had a better 25 year economic growth period with high marginal tax rates than we did during the Reagan, Bush 41, Clinton, and Bush 43 years.
And when Democrats prompted legislation to put these higher marginal rates on the ultra-rich, the GOP blocked it, screaming that we had to protect our precious rich people from paying even slightly higher taxes.
In other words, Michael Boskin is lying, then he's making stuff up based on that lie to get to this "Obama will take 71% of what you earn! SOCIALIST STATE!" idiocy.
But what do you expect from Rupert Murdoch's econ rag?