If It's Thursday, It Must Be Time To Cut Taxes On The Rich

The Wall Street Journal is complaining that taxes are just too darn high, and if President Obama doesn't lower them on the super-rich and especially on corporations, why we'll just have to cut all your hours to part-time status, peons.

High tax rates—on both labor income and consumption—reduce the incentive to work by making consumption more expensive relative to leisure, for example. The incentive to produce goods for the market is particularly depressed when tax revenue is returned to households either as government transfers or transfers-in-kind—such as public schooling, police and fire protection, food stamps, and health care—that substitute for private consumption.

In the 1950s, when European tax rates were low, many Western Europeans, including the French and the Germans, worked more hours per capita than did Americans. Over time, tax rates that affect earnings and consumption rose substantially in much of Western Europe. Over the decades, these have accounted for much of the nearly 30% decline in work hours in several European countries—to 1,000 hours per adult per year today from around 1,400 in the 1950s.

Changes in tax rates are also important in accounting for the increase in the number of hours worked in the Netherlands in the late 1980s, following the enactment of lower marginal income-tax rates.
In Japan, the tax rate on earnings and consumption is about the same as it is in the U.S., and the average Japanese worker in 2007 (the last nonrecession year) worked 1,363 hours—or about the same as the 1,336 worked by the average American.

All this has major implications for the U.S. Consider California, which just enacted higher rates of income and sales tax. The top California income-tax rate will be 13.3%, and the top sales-tax rate in some areas may rise as high as 10%. Combine these state taxes with a top combined federal rate of 44%, plus federal excise taxes, and the combined marginal tax rate for the highest California earners is likely to be around 60%—as high as in France, Germany and Italy. 

Except it's not, because of loopholes and deductions (and the lie about the top rate being 44% when effectively loopholes make it half that) and we're not living in socialist anything.

It's the same tired dogma of the Norquist age:  we can never raise taxes ever on anyone for any reason, because if we did, we'd have revenue enough to actually make government work.  Under no circumstances can that be allowed to happen on the GOP's watch.

It's like the last two presidential elections and the financial crisis of 2008 never happened.