Clearly from the data: the rich have consumed the Trump tax cuts

Anjali Jain
When Ronald Reagan was elected president, the top income tax rate in the United States was at 70%.

Who bears the income tax burden, according to the most recent IRS data, demonstrates once more the advantages of lower tax rates over higher ones.

Bernie Sanders ought to be vigilant.

Upon the inauguration of President Donald Trump, the top 1% of taxpayers (those earning $675K or more annually) contributed slightly over 40% of the total income taxes gathered.

As a result of the 2017 Trump tax reduction, the effective maximum federal tax rate was reduced from 42% to 37%.

- Advertisement -

As they do now, Joe Biden and Bernie Sanders both criticized this as a favor to the wealthy.
Nevertheless, according to the most recent IRS tax return data (for 2021), despite the reductions in these rates and the corporate tax rate from 35% to 21%, the proportion of the tax burden borne by the top 1% increased to nearly 46%.

Why does it always come as a surprise to everyone when this occurs?

When the highest tax rate falls, high-income earners invest less in retirement savings and attain greater earnings. None of that ought to surprise anyone. The inverse correlation between the highest tax rate implemented and the proportion of taxes borne by the affluent is illustrated in the chart below.

For instance, upon the inauguration of Ronald Reagan as president, the highest rate of income tax in the United States was 70%. Individuals comprising the wealthiest 1% of taxpayers contributed approximately 19% of the total income tax. The wealthy paid a 25% share of taxes when Reagan reduced that rate to 50% in 1987 and further to 28% in 1987 (a tax reform that nearly every senator, including Al Gore, Ted Kennedy, and Joe Biden), an amount that nearly every senator supported.

Reflect upon that: At a time when the maximum tax rate was 70%, the affluent borne a tax burden of less than 20%. At the current income tax rate of 37%, nearly half of all income taxes are paid by the top 1%.
Furthermore, according to our data, the top 1% paid only 15% of the total taxes in the early 1960s, when the highest tax rate was 91%, prior to the Kennedy tax cuts.

- Advertisement -

Although this inverse relationship between taxes paid and tax rates appears counterintuitive and nearly mathematically impossible, there are a number of reasons why high tax rates on the wealthy do not generate much revenue.

First, high-income earners find deductions to avoid paying those high tax rates considerably more enticing when tax rates are high; these deductions enter the system with the same certainty that morsels on the kitchen floor attract rodents.

It is exceedingly ironic that the same Democrats who advocate for increasing the federal tax rate to 50%, 60%, or even 70% in order to compel the affluent to “pay their fair share” are also the most vocal proponents in Congress of reinstating the most opulent tax favor ever designed for the ultra-wealthy: state and local tax deductibility.

- Advertisement -

Additionally, green energy tax deductions offer enormous shelters for the wealthy. Additionally, high tax rates propel taxable income and economic activity to countries with lower tax rates. By doing so, Ireland has achieved economic prominence and excellence among European nations.

Ultimately, elevated tax rates impede growth by penalizing economic activity and investment monetarily.
This reduces the number of affluent individuals with modest income gains who can be exploited.
This election is nearly a referendum on whether the United States should maintain its current low tax rates (as proposed by Trump) or increase investment rates to at least 50%, as endorsed by President Biden.
It is a fairly safe wager that the economy will underperform if the latter occurs.

Furthermore, if past performance is any indication, Taylor Swift, Bill Gates, Elon Musk, and Jeff Bezos will ultimately owe less in taxes rather than more.

TAGGED:
Share This Article
Follow:
Hello, I'm Anjali Jain, a passionate writer navigating the dynamic realms of entertainment, politics, and technology. My blog serves as a digital canvas where I explore the intricate threads that weave together these diverse spheres, offering readers a comprehensive and engaging perspective. Entertainment Aficionado: As an avid consumer of all things entertainment, I delve into the worlds of movies, television, music, and more. Through my blog, I share insightful analyses, reviews, and behind-the-scenes glimpses into the ever-evolving landscape of pop culture. Political Explorer: I'm not one to shy away from the complexities of the political arena. From local issues to global affairs, my writings aim to unravel the intricacies of political events, fostering meaningful conversations about the societal impact of policy decisions. Tech Enthusiast: With an insatiable curiosity for technology, I keep my readers abreast of the latest innovations and trends in the tech world. My articles break down complex concepts, making technology accessible and exploring its profound influence on our daily lives. Narrative Architect: Through my writing, I craft narratives that bridge the gap between entertainment, politics, and technology. Each blog post is a journey, offering readers a thought-provoking exploration of the forces shaping our world. Join me in unraveling the stories that define our culture. Connect with me on Facebook, Instagram and X for real-time updates, discussions, and a shared passion for the fascinating intersection of entertainment, politics, and tech.
Leave a comment

Discover more from Kordinate.World

Subscribe now to keep reading and get access to the full archive.

Continue reading