Tax rates do not equal tax collections. Raising tax rates will not balance the budget. Doing more of what got us into the economic doldrums will not get us out. Solution: Cut taxes and spending.
From 1950 through 1963, the highest income tax rate varied from 91 percent to 92 percent. During this time, the federal government collected 16.93 percent of the nation’s gross domestic product in taxes. From 1971 through 1980, the highest rate was 70 percent and the feds took 15.04 percent of our GDP. After Bush’s tax rate cuts, from 2003 through 2011 the highest rate was 35 percent and the take was 16.51 percent of GDP. So, during the Great Recession, Bush’s lower tax rates collected more than the 70 percent rate and almost as much as the 91 percent rate.
From 2001 to 2003, the Clinton tax rates resulted in the top 1 percent paying 33.15 percent and the bottom 50 percent paying 4.55 percent of all income taxes. Since 2004, the top 1 percent has paid 37.39 percent and the bottom 50 percent paid 3.28 percent.
Tax rates affect economic activity. Politicians know this and put high tax rates on tobacco and alcohol to discourage their use. Similarly, Obama’s desired higher tax rates on income will discourage investment, labor and production.