The Republican's tax plan...whoa
Posted on 2011-04-05 21:04:00
I was listening on NPR about the plan and one detail made me do a double-take: they want to lower the top tax rate to 25%. (currently the rates are 10%, 15%, 25%, 28%, 33%, and 35%) Going from 35% to 25% sounded like a crazy reduction, especially for a plan that purports to balance the budget.
But, lo and behold, that number is correct. Currently, the 35% rate only goes into effect after the first $375K of taxable income.
Maaaaaybe, if you want to balance the budget but not privatize Medicare, you could not lower the top tax rate to the lowest it's been since the 1930's?
Comment from girdsman:
In general, I agree. I was shocked to hear that proposed, and think that it is a stupid idea to cut the tax rate for higher income people.
The one portion of that idea which may have merit is because for some crazy reason here in the US, corporations are also treated as individuals. I would be in favor of cutting the corporate tax rate, as I think that would actually improve the US economy and increase tax revenue.
First, most of the big corporations currently do not pay tax in the US, as they find mechanisms to move all their tax liabilities overseas, so cutting taxes on big corporations would not cause a significant loss in revenue. In fact, it could actually increase tax revenue from large corporations, as at a certain tax level it would become more profitable for them to pay the US tax rather than to spend the money finding loopholes to shift the liabilities to a foreign country when the rate difference is no longer as large.
Second, it would significantly help small businesses in the US, making small businesses more profitable (and globally competitive). Small businesses create the vast majority of new jobs; making the creation of small businesses easier and more profitable would be one of the best things we could do for the country.
On a somewhat related topic, I ran across a graph recently which highlights the trend in the US, and really shows that government spending (not taxes) needs to be cut. I forget where I originally saw it, but Google found a near match, http://www.usgovernmentspending.com/us_20th_century_chart.html. Federal, state, and local spending as a percentage of GDP is now unmatched historically with the exception of a brief spike to fund World War II. Further, the trend has been steadily upwards. Clearly, the trend is unsustainable. When looked at in terms of deficits, we clearly should be cutting spending (which can't be just from "discretionary" spending), and we shouldn't reduce tax revenue.
Comment from gregstoll:
Yeah, from what little I understand about the corporate tax system, it's a giant mess. I'd have no problem with lowering that tax rate and eliminating loopholes to make things more sane.
I agree that we need to control spending. I'm just not sure that dramatically cutting spending, especially in the face of a very very slow jobs recovery is the time to do it. But I'd be for something like the bipartisan Simpson-Bowles plan (.pdf) which doesn't begin cuts until FY2012.
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