26 February 2010

Tax Fraud

Debunking the claim that higher income-tax rates reduce GDP.

By Eliot Spitzer

The American debate over taxes is ferocious and highly partisan. Some, mostly Republicans, reflexively oppose all taxes. Others, mostly Democrats, decry the lack of progressivity and fairness in the tax system and favor higher tax rates for the wealthy.

This debate isn't new. The same arguments have been repeated, with the same passion, since our income tax system was created—first during the Civil War and then—after its initial rejection by the Supreme Court—following the ratification of the 16th Amendment in 1913. A wonderful book by Steven Weisman, The Great Tax Wars, brings this history to life.

But as Weisman makes clear, one thing has changed in a spectacular manner, and that is the American public's—and American politicians'—willingness to defend high marginal income-tax rates as an essential and proper way to pay for the cost of government. Until a generation ago, many Americans and their representatives argued vehemently that the wealthy ought to pay more in taxes, but that position has drastically declined in popularity. Weisman sets the debate in the context of the battle between those who invoke justice—progressive taxes create equity and hence justice—and those who invoke virtue—the belief that hard work should be rewarded and taxing higher income at an elevated level creates a disincentive to the hard work we should promote.

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