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1 Are High Surtax Rates Worthwhile [i] (1957)

handle is hein.tera/arehigr0001 and id is 1 raw text is: Are High Surtax Rates Worthwhile? This is a summary of a 40-page study by the above title, prepared by Tax Foundation, Inc. Single copies of the study are available without charge from the Foundation's office at 30 Rockefeller Plaza, New York 20, N. Y. A NOTE BY ROSWELL MAGILL President, Tax Foundation This study is designed to shed light on one of the most difficult tax problems of our time. In brief, it shows that much of the damage to individual incentives, and many of the problems of tax impact and litigation, arise out of the extraordinary and indefensible high rates of our progressive income tax. By applying a new research yardstick to the effects of high surtax rates, the study confirms the conclusion that the steeply progressive rates of the income tax are not worthwhile. From a revenue standpoint, they diminish receipts instead of expanding them. They distort economic activity by influencing incentives and business motives, and they handi- cap economic growth. They lead to practices that are wasteful and de- structive. To obviate these dangerous effects, the individual surtax rates should be readjusted to a ceiling of not over 50 percent. Although the apparent revenue loss would be about. $700 million, the study shows that even this relatively modest sum would be likely to shrink in actual practice. Except in periods of recession, cuts in top marginal rates historically have been followed by substantial increases in the income subject to these rates. Moreover, the entire economy will benefit from lower top rates. Pools of new capital wotild become available for new enterprises. If we want to preserve the process of individual saving and risking for profit, which has given the biggest single impetus to our fabulous economic history, we must begin at once to prune high surtax rates. They are not worthwhile in these times. Indeed, they never were.

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