Thursday, May 11, 2006

Ponder the Thought

I'm spending the latter half of my day reading through the Treasury Report prepared at the behest of Reagan in 1984 (known as Treasury I). I ran across this line:

First, the smaller the tax base, the higher tax rates must be to raise a given amount of revenue.

It's a simple statement that hits you over the face with its obviousness, but I had never really thought of it before. Think of the implications of the line. If we stop allowing deductions, exclusions, and credits for everything under the sun, the tax base will increase. By how much? I don't know, I'm not an economist. But maybe it's the case that effective rate of taxation on an individual would be less with no deductions or exclusions and a lower rate. I don't know what the rates would have to be for that to be true, but it's a compelling idea for those who think an income tax should be economically neutral.


Blogger Xeno said...

Right now the only people that pay no taxes are those whos earnings are under the poverty line. The only way to increase the amount of people paying taxes is to increase the amount of people working or make people with little money pay.

6:50 PM  

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