Stupid Pro-Tax Defenses
February 24, 2011 Taxation

Have you ever heard an argument claiming that certain taxes (such as corporate taxes) are too low because the data suggests that those tax revenues as a share of GDP are small, or shrinking, or lower than in some other country? I have. I hear it rather frequently. Does the possibility that revenues are low because of the tax rates ever strike these people as possible?

Seriously. If we had 100% tax rates on corporate earnings, how much revenue would that generate? I’d argue near zero. So would you point to corporate tax revenues as a share of GDP being zero as evidence that taxes are “too low?” And no, this is not just an observation about the Laffer curve. I suppose someone who is hostile to the above point of view could easily say something like, “yeah, you like to point to the large amounts of revenue generated by the income tax as evidence that taxes are “too high” but really, marginal rates are low here, which is why collections are high.” Which is why I don’t put much weight in those kinds of arguments and also focus my attention on excessive spending and marginal incentives.

"1" Comment
  1. A person can honestly argue/differ over where on the curve we might be, and what the warped shape of the curve might be … but I think it’s ridiculous to claim that no such curve exists.

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