‘a formula that might serve as the theme song for tax year 2011: “39.6 + 2 (phaseout of pep and pease) + 3.8 (Medicare net investment income tax) = 45.4. Add in state-level taxes and 50 is easy to reach.’ 50% of income to the government.

By Amity Shlaes – Sep 21, 2010 9:00 PM ET  Bloomberg.com

EXCERPTS:

‘I asked the biggest, baddest tax mind I know, former Congressional Budget Office director Douglas Holtz-Eakin, to tell what he thinks the top tax is. Even Holtz-Eakin approximated, texting back a formula that might serve as the theme song for tax year 2011: “39.6 + 2 (phaseout of pep and pease) + 3.8 (Medicare net investment income tax) = 45.4. Add in state-level taxes and 50 is easy to reach.”’

‘The staircase concept of rates rising on successive income tranches is hard enough. Add in all the traps and breaks and taxpayers become truly confused and give up protesting.’

‘Only when World War II broke out did this class tax become a mass tax. And then two extra tricks were necessary for the transition. First, many taxpayers were hardly in a position to resist a shift in the code since they were already government captives: draftees. Second, withholding was introduced.’

‘After the war, the feds found new ways to justify and complicate our tax system. They marketed progressivity as a necessity for the nation’s general welfare. The very name itself helped. Many people don’t want to oppose political progressives, so they go along with the idea of a progressive tax structure. Even those who reject progressive politics may not want to be caught opposing something that sounds like progress. The progressivity brand was so successful that government was able to keep the top rate at more than 70 percent for decades.’

‘The point isn’t that taxpayers are stupid. Rather, they are stupefied and conflicted.’

FULL STORY

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