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Taxing the Rich
In recent decades the income tax rates on the affluent in the United States have gone from 70 percent in 1980, to 28 percent in 1988, to 39 percent currently. According to Joel Slemrod of the University of Michigan, a definitive study of the economic consequences of such a wide variance in taxing the rich has never been undertaken. For example, some have argued that increased tax rates on high-income taxpayers discourage savings, innovation, and entrepreneurship or increase the use of tax shelters. If so, then the economic costs of higher tax rates might outweigh the benefits of increased tax revenues. Recent changes in the top marginal tax rate make it possible to study these questions empirically.
In collaboration with his colleagues at Michigan's Office of Tax Policy Research, Slemrod asked leading public finance economists to write on various aspects of tax policy affecting that rich. In addition to providing general background on high-income individuals and a history of taxing the rich, the papers deal with such topics as capital gains taxes, savings behavior, and tax avoidance. The papers were discussed at academic conferences in Ann Arbor for which the Foundation provided support. Slemrod believes the project will result in quantitative estimates of the impact of raising and lowering tax rates and of changing the tax environment affecting the affluent.