Dan Mitchell’s article today in the Wall Street Journal about why we need marginal tax rate cuts rather than child tax credits has elicited a response from Jim Pethokoukis of AEI:
This morning we released a new report by my colleague Liz Malm, on how a proposed Illinois tax increase would affect small businesses and job creation.
For several months, there has been buzz in Illinois political circles about a progressive income tax, timed to prevent the scheduled drop in the state's current flat income tax from 5% to 3.75% at the end of this year. Last week, House Speaker Michael Madigan put out a plan that would impose a top rate of 8% on income over $1 million. Other leading plans have top rates as high as 11%, increasing taxes on all taxpayers.
Here are some key findings of our new report:
While most people think taxes on "millionaires" only affect wealthy heirs with trust funds, the reality is that most Illinois employers, employing a large proportion of Illinois workers, pay taxes through the individual tax code. Increasing their taxes directly affects job creation and economic growth.
Illinois already has one of the highest state-local tax burdens in the country, and while it has fiscal challenges, it should try to address them without destroying one of the best features of its tax code: a low, simple income tax.
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Dan Mitchell from the Cato Institute recently wrote about the debate over increasing the child tax credit or lowering marginal tax rates. He says lower marginal tax rates would have a bigger impact on the incentive to...