So, thinking more, and reading more into laffer curves, I wonder if they actually amount to anything at all, or are actually relevant until you get into the near 100% part of the taxation curve. Here's a few arguments for that.
First of all, the French 75% tax rate was only the marginal income tax rate that they faced. As noted in my previous laffer curve article, the French tax rate now on the rich is actually 69% including all taxes. That includes the new 45% tax rate. If they were being hit at 75%, their tax rate would actually be 99%, which would definitely be a disincentive no matter how you look at it. Meanwhile, 47% marginal tax rate in the US is only about 33% looking only federal taxes. If we had UBI and Medicare for all, they would be paying 64% on the federal level.
There's also the fact that we regularly taxed the rich at 70% or higher, not including local taxes, before 1980. Sometimes as high as 94%. Revenues remained steady before 1980, with the exception of a dip in the late 40s that seems unrelated to tax rates (given rates remained high in the 1950s). And the only time I actually can see an appreciable dip is when you get presidents like Reagan, Bush, and Trump taxing the rich at lower rates.
It should also be noted that the rich never paid close to those high rates, apparently rich people decided to instead invest in their businesses, and growth happened at a similar or higher rate than does today. So, that said, could we tax the rich at above 70% without negative consequences? Sure. Could we necessarily draw in the revenue? It remains to be seen. The American tax code is full of holes and when the rates were high the rich barely paid more than they do now.
So how does the US stack up to other countries in terms of tax revenues in spending? Well, we tend to tax and spend a lot less than other countries. Often around 20 points less. Around 25% rather than the 45% of many European social democracies. With UBI and medicare for all, we would be pushing 55%, which is concerning. We can question whether this can be done. However, in the defense of my ideas, spending on UBI is highly misleading, as much of it is pumped right back into the economy. The real cost of UBI in net is actually a fraction of its real cost, around $500 billion, rather than the $3.5 trillion projected. So much of the negative impacts on the market could be reversed simply by pumping the money back out. The bark is worse than its bite, and if I went by the NIT formula, most of the brunt would be paid by the top 20% anyway. It depends whether you're a supply side economist or a demand side one. Supply side economists love to talk of laffer curves and how lower taxes on the rich have positive impacts on the economy, but demand side economists like Keynesians tend to have more evidence on their side defending their positions.
Still, we should be cautious in advocating for both a basic income and medicare for all simultaneously. It would require a 31% point increase to federal marginal tax rates across the board. This would not be bad for most lower income people. Even if they pay 40-50% in practice, that's like a social democracy anyway, and a lot of the money would be going back to them and increasing their incomes overall. However, the problem is with the high income earners. Could we actually raise their taxes 30 points from around the 30-50% they pay now to around 60-80%? Data is mixed. The laffer curve is around 70% allegedly although I have yet to see negative economic impacts from it being higher. It just did not necessarily raise more revenues that way. But that's the problem. THese ideas are expensive, and they need revenue. While I don't think these ideas could destroy the economy in their current form, revenue expectations could fall short of what I hope. However, we don't know what the real limits are, and how the rich would react to such high taxes (after all they already dodge taxes today, and the amount dodged could pay for around 1/3 of a UBI or 1/2 of medicare for all). We will have to see.
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