Raising marginal tax rate will help, not hurt

The July 15 letter, “Opinion pages move very far left,” states that when tax rates have been lowered, the government took in more revenue. This is a favorite right wing half-truth. The only time revenues increase when tax rates are lowered is when the marginal tax rate is on the back side of the Laffer curve.

No one knows exactly what the Laffer curve looks like, but the peak is likely somewhere around a marginal tax rate of 50 percent.

(The Laffer curve begins at the point when the tax rate is zero. Of course there are no government revenues. It ends when the tax rate is 100 percent. At this point, government revenues are also zero, because no one will work if they must give all their earnings to the government. Somewhere in between, government revenues are maximized. Arthur Laffer is a conservative economist who served as an adviser to the Reagan administration.)

When President Reagan lowered taxes, the highest marginal rate was 70 percent. When President Kennedy lowered taxes, the highest marginal tax rate was 90 percent (no, this is not a misprint). Today the highest marginal tax rate is 36 percent. President Obama wants to raise it back to 39 percent for people making more than $250,000, where it was before President Bush lowered it. This is highly likely on the front side of the Laffer curve, so the result would be lowering the deficit without a significant impact on economic activity.

I’m delighted to see the commentaries by Brian Baird. In his first article, he’s exactly correct when he says that the national debt is everyone’s problem, and everyone must be part of the solution. For too long most people have wanted government services that benefit them, funded by taxes paid by someone else. The tea partiers are among the worst offenders. They want to cut children’s health care, education, and other critical services, but they won’t give up a nickel of their Social Security benefits or Medicare.

Jerry Fraser
Lynnwood