Monday, May 09, 2005

When do liberals consider taxes to be too much?

Jim Henley asked the question. Matt Yglesias dodged it. Kevin Drum, a liberal blogger I should really be paying more attention to, answers it.

He lists 40% as "unwise"(which wasn't really the question, but hey, I'm all for more information), 50% as "counterproductive", and 60% as "unjust".

Myself, I'd put 40% as the figure that is unjust, at a minimum. It seems that whenever we've increased that top rate past 40%, we start running into problems of declining revenues and reduced compliance. Which is understandable. It's an oppressive rate.

But that's a minimum. Whether or not something is just is a lot different from whether or not something can be done without unduly impacting the economy. So I'd say that advocating tax rates higher than 40% is crazy, but that even as high as 25%, we're in unjust territory. But that's just my opinion. I've spent a lot of time studying what the government spends money on and how it raises revenues. Taxes and spending are something I feel I've got a pretty good handle on. So I feel pretty comfortable in saying that the federal government, under normal peacetime circumstances, can get by with 15% of GDP. If I was really ambitious I'd go so far as to say they could do it on 12%. 9 to 10% once you can eliminate most of the national debt. But let's just go with 15% for now. I don't think a tax rate over 25% is really necessary to fund that fully.

Like Kevin, I'm speaking of effective tax rates here, not the marginal tax bracket.

I also think that Democrats really hurt themselves when they can't bring themselves to say that any tax rate is too high from a moral perspective. It makes one wonder if they have any respect for the rights of citizens to own property. What else can one think, when they think it's morally okay to take more than half of it?