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The Tax Foundation’s Scott Hodge and MQS Management founder Bob Gelfond on efforts to raise taxes.
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Great starting off tonight taxes are the talk of the town and have been for days.
It seems like much of the conversation has focused on the wealthy in getting them to pay more.
-- a new study about a Tax Foundation flips the argument over who really is paying their fair share on its head -- numbers.
Basically showed that the tax rate paid by individuals with income in the top one present.
Average 23%.
That's the average well all filers in the bottom 50%.
Paid an average of 2% tax rate that is almost ten times more joining me is Scott Hodge president of the Tax Foundation.
We also have Bob -- -- -- founder -- and q.s management thanks to both of you for joining us and Scott I wanna start with uses these numbers are are coming from your foundation.
What is the average tax rate for our viewers and why did you decide to isolate this metric.
Well this is brand new data out of the IRS -- 2010.
And the average for all Americans is somewhere around ten or 11%.
But for the wealthiest Americans those in the top 1% those earning over say 370000.
Dollars a year.
Their pain over 23% of their income in federal income taxes and as you mentioned.
The poorest 50% Americans.
They pay an average 2% of their income in taxes -- -- after all and that doesn't include about half of all Americans who pay no income taxes whatsoever.
That adds up to about 58 million Americans -- zero income but.
Our average tax rate I mean you're looking at all the money they're making from dividends from everything -- you could possibly making your taking the average of that Peter -- so what -- so why do you people.
What is the difference doing that for our viewers who don't understand and it's tax rate that we're always talking about raising it from 35 to 39% roughly.
Right -- the tax code has six different income tax brackets everything from 10% of the bottom to 35% of the top.
And so that's different than what we call the average tax rate when you -- include.
Take account for our credits and deductions which everyone gets the okay.
And that brings down your average tax rate from that that marginal rate.
Then your -- -- spending cap you know get Bob what do you think about that's.
It than the bigger issue is that higher tax rates -- slow -- the economy.
And then a slow economy is -- facing now to be raising rates even even higher.
I can't imagine any economist really supporting that regardless of what's going on on the fiscal -- saying this is the entire wrong conversation to be having anyway talking about taking more money away from individuals and giving it to the government isn't good for the economy no matter what.
I mean yes exactly and and particularly when the economy is weak even that the keynesian economists will tell you that this is not the right time to be raising taxes I don't so we have a lot of keynesian college timers say get big there's no demand out there and the government has to make up.
For the demand that doesn't exist from consumers.
So that means you gotta give them money so that they can -- -- -- now well they would say use you spend but they wouldn't say tax at the same time they would say that's gonna counteract whatever spending.
You do is with the tax increases.
I think what you need to do is is actually cut spending.
And a minimum keep taxes where they are be better if you could even reduce them.
And if you need to raise more revenue you do things like privatizations loses -- much better way for the government to get revenue this type of circumstance.
Yet Scott you think the point that.
Of course the government's gonna go out and you know trying raise taxes on the well because they're kind of the only ones that are out there paying tax that the only way to get revenue.
Is to go -- get it from wealthy right.
Well I -- That -- -- obviously like Willie Sutton that's where the money is but you have to be extremely careful how you do it.
Because we've looked at the economics.
-- -- run Obama's plan through our economic model.
And then found that for every dollar that it would increase in federal tax revenues it would reduce GDP by ten dollars that's a very poor -- tradeoff.
Is to have higher tax revenues but lower -- GDP and economic growth that's not the direction that we wanna head.
If you're gonna increase taxes we should do it through economic growth.
That comes through Smart tax policy not dumb tax policy but.
But they always say you know if you don't know wealthy won't miss it they're just gonna pay a little bit more it's their fair share it'll help close the gap how do you respond to that.
Well all of that money is locked up in in productive -- -- whether it's in a business or in the stock market or somewhere else and so that the more that you tax of that income.
That means there's less investment there's less for the business -- -- less for hiring.
It has to come from somewhere it is not a cost -- exercise and ultimately that trickles down to workers through lower productivity lower wages that's bad for everybody but these lower standards -- for everybody but is there a difference between money in the hands of the government money in the hands of the private sector.
Well certainly the private sector is much better at spending that money you're -- I don't have a productively.
I don't know that assist you see that and then economies where you have more private sector activity do much stronger over time and then economies that have a large government sectors.
The Soviet Union obviously is -- extreme case but even in lesser cases you know you look at what's going on in Europe right now.
A large part of that is because of -- a very large government sector there.
Scott we have an enormous deficit Harriet and -- that we don't get money from the rich.
-- I think there are lots of ways to raise revenue.
Privatization was just mention asset sales let's sell off a lot of these government businesses.
Lets tax some of the unproductive things that are out there things that are not already in the tax code there are lots of different ways you can raise revenues without undermining economic -- that technical answer wasn't gonna cut spending.
But that's okay I I think about the need for joining us now to a.
