A deeper analysis might have noted, for instance, that little is known about the impact of very high tax rates on how taxpayers choose careers and the follow-on impact on economic growth. America has long benefited from the willingness of its people to take big risks to, say, start a search engine company or online retailer. Risk taking is influenced at least to some degree by hopes for an eventual big payoff. “Significantly reducing that possibility by hitting those individuals with extremely high income taxes is of first-order importance in determining the optimal top tax rate,” my AEI colleagues Aparna Mathur, Sita Slavov, and Michael Strain argued in a 2012 research note.
Of course if conservatives wanted a less wonky attack, they might have pressed the moral dimension. Should the government take more than half of a citizen’s income in taxes, even in a marginal tax rate system? And they could have done so without presenting a wrongheaded explanation of how the American tax code works. Instead, however, we get “tax hikes are slavery.”
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