Why is it that high marginal tax rates create jobs? Well the government is going to spend the same no matter what revenues are, so it will need to borrow cash if revenues are not high. When marginal tax rates on high earners are high the government takes in a lot of $$ and doesn’t need to run deficits, in fact as Clinton showed the government can even run surpluses and pay down debt. The public debt is well known to crowd out private debt and raise interest rates for individuals and business who seek capital. So when you have higher marginal rates you have greater private access to capital with lower interest rates. The results? Job growth.

I don’t mind the idea of extending the income tax brackets further up the pay scale too much, but the logic behind your reasons for wanting this is terribly flawed. The only reason to do it is because the government needs more money and its an easy place to look. But when you hear stats like the top 5% of earners pay 50% of the taxes in the country, I’m inclined to think that top 5% already pays enough. Maybe we should start working on the lower incomes that net money from the government through our socialist programs. Or we could abolish progressive income tax all together and create a national sales tax w/ a flat income tax. High spenders are taxed heavily, low spenders hardly taxed at all.

I also agree with Corey’s point that the tax law should not be used for behavior modification. It seems to me that we are heading back in the old direction of higher rates with many new deductions and credits. Those so called targeted tax incentives are really just more loopholes.

I believe that reducing tax rates would stimulate the economy and lower unemployment. Another factor that is increasing unemployment is the increased unemployment benefits we have right now. Yesterday I overheard someone saying that she was making more on unemployment than she was working. She has no incentive to find a job.

I think the other important point is the difference between heavy taxation of those with extraordinarily high income versus taxation of those who make on the order of 6 times the national average. If a person feels that 60% taxation on the amount of income above 25 times the national median income (50% of people earn more than this amount, 50% earn less) would require him to retire, then we can certainly use those funds to provide jobs for several people who would otherwise be unemployed because the company wouldn’t have the money after paying one person the wage of 25 average people. If one uses the median income ($32,140 for persons over 25 with earnings in 2005) and applies a heavy tax to the amount more than 25 times that, the tax is unchanged on those making less than $800,000 per year, and this would be increased in the event that there was a family to support.

Understand that a person making $1 million would only pay the heavy tax on $200,000, leaving the income up to that point unaffected. Thus the only people who would feel a significant effect would be those making far more than $800,000 per year.