Friday, September 21, 2012

Read excerpts here of Harvard Professor Martin Feldstein's tax analysis illustrating feasibility of maintaining to increasing tax revenues via the Romney plan.

...past experience shows that taxpayers do respond to lower marginal tax rates by acting in 
ways that increase their taxable incomes: increasing work effort, receiving more of their 
compensation in the form of taxable cash rather than untaxed fringe benefits, and spending less 
of their income on tax-favored forms of consumption that are deducted or excluded in calculating 
taxable income. More specifically, history shows that a tax cut that raises the after-tax share of 
earnings that an individual keeps by 10% raises taxable income by about 5%. This implies that 
the revenue loss from the 20% tax cut would be $148 billion, not $181 billion. 


And what do we get when we apply a 30% marginal tax rate to the $636 billion in itemized 
deductions? Extra revenue of $191 billion—more than enough to offset the revenue losses from 
the individual income tax cuts proposed by Gov. Romney.


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