Cato Quality Writing: Tax Rate Increases Lead to Tighter Labor Markets?
Brooke Oberwetter’s critique of Wexler’s Social Security proposal wants us to believe that we can somehow avoid tax increases. But then there is this:
He has proposed the largest marginal tax increase this country has seen in decades: a 6 percent tax hike on all income over the current $90,000 payroll tax cap. Let us pass over the discussion of how ever-rising marginal tax rates lead to tighter labor markets, reductions in productivity, and declines in reported income. Let us forget in their entirety the issues of tax revenue and solvency and instead try to figure out why, exactly, Democratic lawmakers are so hell-bent on preserving the basic current structure of Social Security.
I can see why Oberwetter wants “us pass over the discussion” of general fund solvency, but did Oberwetter mean to suggest an employment tax increase would reduce the current slack in the labor market?