Monday, November 21, 2011

Is there an echo in here?

John Steele Gordon has a piece making the same point I made in my previous post: Get rid of deductions and lower the marginal tax rates.  Decisions are made at the margin and if the next dollar earned is taxed at a higher rate, there is less incentive to earn it.  He makes the additional point that high marginal rates lead to rent-seeking and that this ends up greatly reducing the progressiveness of the tax code:
In other words, the higher the marginal rate, the more lobbying for new loopholes goes on to prevent those high rates from actually being collected. And the more tax accountants and lawyers scour the endless depths of the tax code to figure out how to structure tax avoidance schemes that will be at least arguably legal.
And the rich have much more political influence than the not-so-rich. Do you think you could get your congressman or senator on the phone in ten minutes flat? I doubt I could. Do you think Warren Buffett could? See what I mean?