Whatever one's opinion of electric automobiles, all reasonable people can agree that the federal government…
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Time to End the Federal Government's Wasteful Electric Car Tax Subsidy Program

Whatever one's opinion of electric automobiles, all reasonable people can agree that the federal government shouldn't be wasting billions of dollars to pick winners and losers in a functioning market.

That's especially true when nearly 80% of the federal subsidies go to households earning over six figures, making it essentially a regressive tax in addition to wasteful spending and a market distortion.

But that's precisely what the existing federal electric vehicle tax credit does.  In 2008, President George W. Bush signed into law a bill passed by the Nancy Pelosi/Chuck Schumer Congress to provide $7,500 tax credits for the purchase of electric cars.  Shortly thereafter, Barack Obama extended that credit to cover the first 200,000 electric autos sold by any and all car manufacturers…[more]

February 22, 2019 • 06:25 pm

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Lessons from History: Lower Tax Rates Boosted Revenues and Increased Share Paid by Wealthier Americans Print
By Timothy H. Lee
Thursday, January 17 2019
[T]he astronomical tax rates they advocate simply wouldn’t generate the revenues they need to pay for their proposals.

Some folks are born silver spoon in hand,
Lord, don’t they help themselves, y’all?
But when the tax man comes to the door,
Lord, the house looks like a rummage sale, yeah…

Creedence Clearwater Revival, “Fortunate Son”

Although more ‘60s-vintage hyperbole than economics textbook prose, CCR’s lyric nevertheless captures that age-old dynamic of wealthier individuals minimizing their tax obligations by gaming the system to reduce taxable income. 

The higher the ostensible tax rate, the greater their incentive to exploit loopholes. 

Paradoxically, for multiple reasons, lower tax rates can actually increase the amount of taxes wealthier individuals end up paying.  

For one thing, lower rates diminish the incentive to engage in strategies that might attract the attention of auditors.  After all, confiscatory rates can trigger a more desperate mindset, whereas a more reasonable tax rate reduces the cost/benefit incentive to play with risk.  Secondly, a lower and more reasonable rate diminishes the underlying sense of unfairness or even outrage over having to surrender exorbitant portions of one’s own earnings to the government. 

In any event, excessively high top tax rates can reduce revenues collected by government from wealthier taxpayers, while reduced rates not only increase revenues, but also increase the share of taxes paid by those individuals compared to taxpayers in more modest income brackets. 

That reality assumed renewed resonance this year with the arrival of the political left’s latest fresh face, who comes peddling an idea that isn’t fresh at all. 

Twenty-nine year-old Alexandria Ocasio-Cortez, or “AOC” to her fanboys and fangirls, is the latest star of the political left.  Imagine an even greener, more platitudinarian, more radical Barack Obama of 2004, and you get the idea. 

Predictably, Congresswoman Ocasio-Cortez advocates every sort of government expansion and new entitlement, from “free” college to a radical environmentalist “Green New Deal.”  When asked by even sympathetic mainstream media interviewers to explain how she’d pay for her panoply of bright ideas, however, Ms. Ocasio-Cortez assumes a deer-in-the-headlights look. 

So recently, Ms. Ocasio-Cortez began advocating raising the top marginal tax rate on higher-income Americans up to 70% to subsidize her ideas. 

She found instant support from leftist voices like the perennially discredited Paul Krugman of The New York Times.  Krugman, you’ll recall, was the man who forecast on election night 2016 that stock markets would plummet and “never” recover.   Before that, he advocated what he labeled a massive “stimulus” program of $600 billion when Obama became president, only to later rationalize the failure of Obama’s even larger $800 billion program by claiming that it wasn’t as large as he would’ve preferred. 

Krugman’s follies aside, the astronomical tax rates they advocate simply wouldn’t generate the revenues they need to pay for their proposals. 

As President John F. Kennedy observed in 1963, when the highest federal tax rate was 91%, “It is a paradoxical truth that tax rates are too high today, and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the tax rates.” 

The late President Kennedy’s theory was soon proven in practice. 

After the top rate was reduced to 70% in 1965, federal income tax revenues increased by 9.2% in 1965, 9.2% again in 1966, 2.1% in 1967 and 14.3% in 1968. 

A similar phenomenon occurred during the Reagan years, when the top rate was reduced to 28%.  Incoming federal revenues skyrocketed, just as capital gains tax revenues did in the 1990s when rates were cut by the Gingrich/Dole Congress and President Bill Clinton. 

Understanding those simple lessons of economic history, it’s no surprise that the nonpartisan Tax Foundation announced this week that Ms. Ocasio-Cortez’s scheme to reintroduce a 70% top rate would actually reduce federal revenues over the next ten years under dynamic scoring. 

But that’s not all.   Contrary to their soak-the-rich mantra, history also demonstrates that the plan would actually diminish the share of taxes paid by Americans in higher income brackets. 

As a leading example, consider what occurred during the Reagan years. 

In 1980, the top 1% paid 19% of the nation's income taxes in America.  By 1989, the top 1% paid over 25%.  The top 5% paid 37% of income taxes in 1980, but 44% in 1989.  The top 10% paid a 49% portion of America's income taxes in 1980, but 56% in 1989.  The top 25%?  They paid 73% of income taxes in 1980, which increased to 77% in 1989. 

Despite constant claims that President George W. Bush brought “tax cuts for the rich,” the results were the same following his tax cuts. 

Between 2001 and 2008, the top 1% saw its share of income taxes rise from 34% to 38%.  During that same period, the top 5% saw its income tax share increase from 53% to 59%.  In 2001, the top 10% paid 65% of the nation’s income taxes, but by 2008 it rose to 70%.  The top 25% paid 83% in 2001, which rose to 86% by 2008.  Finally, during that span the top half’s share rose from 96% to 97%. 

The lesson is simple and inescapable.  By reducing top marginal rates, lawmakers can reduce the loopholes that wealthier taxpayers can pay their accountants to exploit, as CCR referenced in “Fortunate Son.”  A remedial economics course might allow Ms. Ocasio-Cortez to finally internalize these truths before more damage occurs. 

As long as Paul Krugman isn’t teaching that course, that is. 

Question of the Week   
Which one of the following has the sole power of impeachment under the U.S. Constitution?
More Questions
Quote of the Day   
 
"In America, the left knows it can't just spring socialism on the land. They must accustom people to their most grandiose projects while maneuvering the politics and grinding away at public opposition.Miss Ocasio-Cortez and her comrades expect us to ridicule then ignore her silly Green New Deal while they work tirelessly to make it a reality. So unless we're willing to cede our most fundamental freedoms…[more]
 
 
—Monica Crowley, The Washington Times
— Monica Crowley, The Washington Times
 
Liberty Poll   

Do you believe President Trump's Emergency Declaration and Executive Order to fund southern border wall construction partially by repurposing DoD funds is within his constitutional authority, despite congressional objections?