Not really, according to a new analysis by Nezih Guner, Martin
Lopez-Daneri, and Gustavo Ventura in VoxEU. Using a model that mimics
the tax distribution characteristics of the US economy, the researchers
find a revenue-maximizing federal rate of 37% for the top 5% and 43% for
the top 1%. The current top marginal tax rate is 39.6% (
but is effectively closer to 45%).
From the study:
The message from these findings is clear. There is not much available revenue from revenue-maximising shifts in the burden of taxation towards high earners
– despite the substantial changes in tax rates across income levels –
and that these changes have non-trivial implications for economic
aggregates.
1.) Left-of-center economists such as Peter Diamond and Emanuel Saez
have been arguing that top rates of 50% to 70% or higher would raise
plenty of tax revenue without damaging the economy. Inequality
researcher Thomas Piketty has called for top rates of 80% on income and
wealth. The Guner/Lopez-Daneri/Ventura study suggests those rates are
too high and would cause great economic harm. (Of course, some want high
tax rates for punitive reasons, not redistributive or budget-balancing
ones.)
2.) This study also seems to support the finding’s of the
UK’s Independent Fiscal Oversight Commission, which determined that
cutting that nation’s top rate from 50% to 45% was revenue neutral,
implying the revenue maximizing rate is in that range.
3.) Keep in mind these Laffer Curve effects are all about short-term
economic impacts. But economists agree that long-term effects are
important, too. America benefits greatly from people who take risks and
make career choices in hopes of striking it rich. As Aparna Mathur, Sita
Slavov, and Michael Strain argue in a 2012 analysis:
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