Marginal Tax Rate Reduction Works For All Classes

What most people want is instant wealth, it's the lotto mentality of not have to actually having to work hard to succeed and still get rich. That a tax cut for the top 1% would actually benefit everyone is lost on the voting public, given all the misinformation coming from the main stream media on the evil rich.

Remember Ronald Reagan's tax cuts didn't really see results until at least a year later but were seen to works for decades? The progressive socialists demand results immediately even though they know that's not possible but still rage when clearer heads say we need a systematic program that will work for everyone, this includes the wealthy but results for all people will take effect over time.

History says it will work but is unacceptable to the political class that is using the lotto mentality to insist on immediate results for their voter base, that is, tax increases on the rich.

Is relying on the ignorance of the voter or the get rich quick mentality the best way to fix a problem? The progressive socialist Democrats believe so as do the majority of voters as witnessed by last November's election for more dependency and more control from the federal government.

Marginal Tax Rates and Income
Source: Karel Mertens, "Marginal Tax Rates and Income: New Time Series Evidence," National Bureau of Economic Research, June 2013.
July 8, 2013

To what extent do marginal tax rates matter for individual decisions to work and invest? The answer is essential for public policy and its role in shaping economic growth, says Karel Mertens of Cornell University.

Mertens found large income responses to changes in marginal tax rates for every income level.
Mertens bases her finding on a new methodological approach and a hypothetical marginal tax rate cut for the top 1 percent of income earners.

• A 1 percent reduction in the marginal tax rate would increase income 0.5 percent in first year, 1 percent in the second year, and another 1 percent the third year.
• The income response is more than twice as much for a tax reform cutting marginal rates more broadly.
• A top marginal rate cut raises real gross domestic product (GDP) by up to 0.3 percent after two years and also has a positive effect on incomes outside of the top 1 percent.
• However, marginal rate cuts targeting top incomes lead to greater income inequality.

These empirical results reinforce the findings by a number of recent studies of large effects of aggregate tax changes on real GDP both in the United States and internationally. The results imply that raising marginal tax rates to resolve budget deficits comes at a high price and that a proportional across-the-board tax cut increases the rate of economic growth and does not necessarily lead to greater income concentration at the top.

• The results are also consistent with the strong negative correlation between top tax rates and top 1 percent income shares documented by other economists.
• However, the positive response of real GDP and incomes outside the top 1 percent to a top marginal rate cut contradict explanations based on tax avoidance or on the notion that the effects come entirely at the expense of lower incomes.

The results are important for assessing the role of income taxation for macroeconomic stabilization and the impact of austerity programs, for understanding the empirical relationship between income taxes and inequality, and for optimal tax policy.