By Hao Li: Subscribe to Hao's RSS feed
August 30, 2010 8:01 PM EDT
An analysis of the correlation among U.S. personal income tax rate, tax receipts, and the gross domestic product (GDP) reveals a high correlation between GDP and tax receipts. However, other correlations among the three data series are noticeably weaker.
To download the Microsoft Excel file of the analysis and data used, click here.
Background
There is a fierce debate in Washington over the expiration of the Bush tax cuts. If these tax cuts are allowed to cease, then personal income tax would increase in 2011. Some want all of them to expire, others want all of them extended, and those in the middle, including the Obama administration, want to extend only some tax cuts.
Follow us
Proponents of keeping the tax cuts say tax hikes are anti-growth. One argument is that given the fragile state of the economic recovery, it is unwise to raise taxes. Others in this camp believe the way to reduce the ballooning U.S. debt is to foster economic growth through tax cuts. Economic growth would then result in higher tax revenues, which would in turn reduce the deficit.
Proponents of letting the income tax cuts expire – thus raising income taxes for 2011 – argue that U.S. debt is too high. To raise tax revenues, they advocate raising the income tax rate. Some in this camp point out that many of Bush's income tax cuts benefit the rich. Therefore, some advocate raising income taxes for only the top two tax brackets.
Findings From Analysis
U.S. tax receipts is highly correlated to GDP growth. However, the correlation among income tax rate and tax receipts is much weaker. So the best way to raise tax revenues is probably through fostering economic growth.
Mark Zuckerberg's $6.4 Billion Loss: Value Of Facebook CEO's Stake A Gambler's Nightmare
Tasha Reign Says ‘Super Hot’ Bill Clinton Wanted To Meet Her and Brooklyn Lee, ‘Sympathetic’ For Viral Photo
Larry Flynt Blasts ‘Prudish And Delusional Right Wing’ Over S.E. Cupp Hustler Photo As ‘The View’ Hosts Jump To The Defense
Joe Biden Says He Understood Suicidal Thoughts In Wrenching Speech To Families Of Fallen Troops
US Cities with Most Underwater Mortgage [SLIDESHOW]We value your privacy. Your email address will not be shared.
