To cover the Congressional Budget Office projection of Mr. Obama’s $841 billion deficit in 2016 requires a 31.7% increase in all income tax rates (and that’s assuming the Social Security income cap is removed). This raises the top rate to 52.2% and brings the total combined marginal tax rate to 68.8%. Government, in short, would take over two-thirds of any incremental earnings. – WSJ

By Michael Boskin at The Wall Street Journal

EXCERPTS:

President Obama has been using the debt-ceiling debate and bipartisan calls for deficit reduction to demand higher taxes. With unemployment stuck at 9.2% and a vigorous economic “recovery” appearing more and more elusive, his timing couldn’t be worse.

Two problems arise when marginal tax rates are raised. First, as college students learn in Econ 101, higher marginal rates cause real economic harm.

Second, as tax rates rise, the tax base shrinks and ultimately, as Art Laffer has long argued, tax rates can become so prohibitive that raising them further reduces revenue—not to mention damaging the economy. That is where U.S. tax rates are headed if we do not control spending soon.

FULL ARTICLE

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