http://www.themoneyillusion.com/?p=12054

The idea that lowering top marigninal tax rates does nothing to growth but increases income inequality sounds about right from what empirical history tells us. So during the Bush years until the crisis hit we saw GDP get as high as 3.5 percent but we also saw inequality rise. So the Stephen Moores and Arthur Laffers have no basis to claim that Bush’s tax cuts gave us the high growth-or at best we could have found other ways to gain a similar level of growth with more income equality.

Please try this

http://diaryofarepublicanhater.blogspot.com/2011/11/danger-of-misleading-economic-arguments.html

rate = MAX(70 – ((12,000/Income)^0.4),0)

This way any small increase in salary doesn’t put you in a worse tax bracket.

$8,000 0%
$16,000 0%
$32,000 5%
$64,000 21%
$128,000 33%
$256,000 42%
$512,000 48%
$1,024,000 54%
$2,048,000 58%
$4,096,000 61%
$8,192,000 63%
$16,384,000 65%

They push 2 bits together and spend no meaningful time talking about 1 of them. The bits are tax rate effects, meaning income changes as tax rates change, and welfare utility for the rich. They assume away the latter and that leaves the paper open to criticism. They don’t, for example, include any numbers on what a range of utility values for the rich would generate as optimal tax rates. They note it would take a very high utility – something near .75 – to generate the current highest marginal rate given their other assumptions. That’s interesting but it needs context to be persuasive. It would also help if they talked about what it means to have certain utility values; I’ve already seen “conservative” commenters pointing out their number as a flaw.

They also use what some would consider a low value for income sensitivity to tax rate change. They note that using a much higher rate would still generate a higher marginal rate than now exists but why not give a graph or table?

The main point I took from the paper is that if you look at historical income and tax rate information and then apply a rational utility value, you get a range of tax rates that are higher than today’s and you only get today’s rates if you argue for radically skewed numbers.