The Case For An Across The Board Tax Rate Reduction

Policy Backgrounders | Taxes

No. 140
Wednesday, September 25, 1996
by Bruce Bartlett


Conclusion

When state and local government receipts are added to federal receipts, total taxes as a share of GDP were the highest in U.S. history in 1995 - 31.3 percent. At the height of World War II in 1945, total taxes consumed only 25 percent of GDP.

In the first three years of the Clinton administration, Americans paid $151.1 billion more in federal taxes than if federal receipts had remained at their 1992 level of 19.2 percent of GDP. An across-the-board 15 percent reduction in individual income tax rates would lower federal receipts as a share of GDP to what they were in 1992.

"Ultimately, tax reduction must be accompanied by spending reduction."

The 15 percent tax rate reduction proposed by Bob Dole would stimulate economic growth and provide some relief to taxpayers, but it would not solve the tax problem. It is just a down payment. To bring federal taxes to a tolerable level will require not just tax reform, but a complete overhaul of the federal budget as well. Ultimately, tax reduction must be accompanied by spending reduction because it will be impossible to lower taxes as much as needed while federal spending consumes over 20 percent of our national output.

NOTE: Nothing written here should be construed as necessarily reflecting the views of the National Center for Policy Analysis or as an attempt to aid or hinder the passage of any bill before Congress.


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