Get Ready for a 70% Marginal Tax Rate by Michael J. Boskin

President Obama has been using the debt-ceiling debate and bipartisan calls for deficit reduction to demand higher taxes. With unemployment stuck at 9.2% and a vigorous economic “recovery” appearing more and more elusive, his timing couldn’t be worse.

Two problems arise when marginal tax rates are raised. First, as college students learn in Econ 101, higher marginal rates cause real economic harm. The combined marginal rate from all taxes is a vital metric, since it heavily influences incentives in the economy—workers and employers, savers and investors base decisions on after-tax returns. Thus tax rates need to be kept as low as possible, on the broadest possible base, consistent with financing necessary government spending.

Second, as tax rates rise, the tax base shrinks and ultimately, as Art Laffer has long argued, tax rates can become so prohibitive that raising them further reduces revenue—not to mention damaging the economy. That is where U.S. tax rates are headed if we do not control spending soon.

The current top federal rate of 35% is scheduled to rise to 39.6% in 2013 (plus one-to-two points from the phase-out of itemized deductions for singles making above $200,000 and couples earning above $250,000). The payroll tax is 12.4% for Social Security (capped at $106,000), and 2.9% for Medicare (no income cap). While the payroll tax is theoretically split between employers and employees, the employers’ share is ultimately shifted to workers in the form of lower wages.

But there are also state income taxes that need to be kept in mind. They contribute to the burden. The top state personal rate in California, for example, is now about 10.5%. Thus the marginal tax rate paid on wages combining all these taxes is 44.1%. (This is a net figure because state income taxes paid are deducted from federal income.)

So, for a family in high-cost California taxed at the top federal rate, the expiration of the Bush tax cuts in 2013, the 0.9% increase in payroll taxes to fund ObamaCare, and the president’s proposal to eventually uncap Social Security payroll taxes would lift its combined marginal tax rate to a stunning 58.4%.

But wait, things get worse.

Read more from Hoover Institution

Our America By T. Scott

    We The People elected you to represent, not to rule !

Senator Minority Leader Mitch McConnell
House Republican Leader Eric Cantor
Speaker of the House John Boehner

Gentlemen,

As talks concerning this nation’s debt rise to impossible dollar heights, it is crucial that you remember who sent you to Washington and why We The People selected you to do the job that certainly needs attention. The task of putting America onto a firm financial base is not going to be an easy one but it isn’t difficult, either, if you will remember why you received our vote and who we really are.

It is axiomatic that the mainstream media will attack any position you take. You have known that you could never rely on these propagandists to tell the truth and while they have launched countless assaults and thrown thousands of barbs your way, We The People elected you because we believed that you demonstrated the strength and willingness to wage the budget battle from the side of truth and honesty. We did not elect you to bargain or to settle for a ” deal” that might make your life a little easier. We expect small rifts will complicate your deliberations but when the last drop of ink is upon the paper, we also know that the unity within all factions of the Republican Party will be strong and resolute and that the projected solutions will be a solutions echoing the wants and needs of all Americans.

To do your job, it is more important now than it has ever been that you turn a deaf ear to the representations of Obama and those who speak for him. That side of any budget discussion is not based on truths or facts that are at hand but is based on scare tactics that are thrown into discussions to alarm people and upon calculated fact distortions made to cast a cloud over any reasonable representations you might make.

We , Americans by the millions, went to Washington a short while ago to show that you had the support of all of us. We have remained steadfast in our support of Constitutional Law, we are on record in opposition to liberal interpretations of that founding document and we resent the liberties taken by Democrats and liberally-minded jurists as they seek to give twisted meaning to our founding law – meaning clearly not intended – meaning excluded by definition in the Federalist Papers which carefully explain the thinking of those who gave this nation a unique, and then unknown, form of government that has been the envy of freedom-loving people around the world

We expect you to represent us and our concerns. We require that you shun the easy path as you seek that pathway which will provide our nation a sound economic future. Just as Obama has taken steps to ban journalists he doesn’t like, a similar action banning those from your news conferences who twist and distort your deliberations in an effort to further mislead the people might send a message that the Republicans are very serious about truth, that Republicans do not look favorably upon those who willingly lie to the American people and that Republicans stand for those basic truths that built this nation and which, when reinstated, will lead The United States of America into a glorious future.

The American people respect honesty. The American people do not expect the road to financial safety to be paved with glib bromides, lies or distortions of known, documentable facts. At the same time, the American people expect that the belt-tightening we have had to endure will spread to Washington as thousands of useless programs feeding upon our treasury will be eliminated as the waste that has characterized government spending will not have a place in the future. We expect that many department budgets need reductions to eliminate fraud and abuse and we require these long-overlooked moves to happen.

Above all things, we expect and require that you represent us, our cares and our concerns for the future of this, our country.

Happy Birthday Calvin Coolidge

America’s birthday is also that of Calvin Coolidge, the only president born on the Fourth of July. Though best remembered as “Silent Cal,” Coolidge is one of the most eloquent defenders of America’s principles. And the Declaration of Independence received his highest praise:

    “If all men are created equal, that is final. If they are endowed with inalienable rights, that is final. If governments derive their just powers from the consent of the governed, that is final. No advance, no progress can be made beyond these propositions.”

Source: Heritage Foundation

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