Tax Foundation Senior Fellow Bob Carroll, Ph.D., appeared on CNBC’s “Street Signs” today to discuss tax evasion versus tax avoidance and the economic consequences of high tax rates: Bob notes that beyond the issue of shifting income from one tax year to another is the fact that high tax rates have the distortive effect of influencing household and business decisions. Economists refer to these costs as the “excess burden” or “deadweight loss” of taxes — the loss in economic activity that would have occurred were it not for the tax. Bob discusses this issue in Tax Foundation Special Report, No. 170, “The Excess Burden of Taxes and the Economic Cost of High Tax Rates.” The graph below illustrates how the total burden (revenue + excess burden) of higher tax rates on the top two income tax brackets due to the expiration of the Bush tax cuts is double the amount of revenue the tax is expected to raise. See more of the Tax Foundation in the News.
