Cutting Tax Rates, Average versus Marginal

Tue, 14 Sep 2010 20:21:48 +0000

I was wondering why I hadn't seen this point made before (h/t Brad DeLong), and then I realized I was in Vegas when the report came out.  It makes a very sensible point: if marginal tax rates on low incomes are reduced, then everyone who earns at least that amount of income has a reduction in total taxes paid.  So this discussion about whose tax cuts are being extended is a bit misguided -- if the reductions in the lowest marginal tax rates are extended, then every taxpayer's total tax payments are extended, at least in part.  Even those at the highest income levels will pay lower taxes (compared to the pre-2001 income tax schedule) than they would if all of the tax rate reductions above those on the lowest income levels were extended.  I recommend the whole post from the CBPP in the first link above.