In the decades since, there has been much additional theoretical work to support Mr. Mirrlees‘ conclusions; but, perhaps, more importantly, there have been the actual outcomes in many of the flat‐ or very low‐rate countries, which have greatly outperformed the high‐rate countries. Even though Mr. Mirrlees is highly regarded by most economic professionals, his work has all but been ignored by those on the political left (including many in the media), because his conclusions are not politically convenient.
In the United States, there has been almost no relation between maximum individual tax rates and tax revenues as a percentage of gross domestic product (GDP). For example, individual‐tax revenues have averaged about 7.9 percent of GDP for the past half‐century, whether the maximum rate was 28 percent (after Ronald Reagan’s reform in the late 1980s), 70 percent (during the Jimmy Carter era in 1978), or 39.6 percent (when Bill Clinton was president in 1995, and also in 2013 under President Obama). All of this only goes to show that higher maximum individual income‐tax rates (despite the conventional wisdom and the endless faulty estimates from the government tax‐revenue forecasters) are no more likely to produce greater revenue as a share of GDP than lower rates. High rates do, however, have the clear disadvantage of causing more tax evasion, lower job creation and slower economic growth.
Many economists view the corporate tax as one of the worst possible taxes, even though it appeals to politicians because they can claim they are taxing the “evil” corporation. Anyone who thinks about it for a minute realizes that only people pay taxes and, therefore, the corporate tax must be paid for by a corporation’s workers in lower wages, by its customers in higher prices, and by its investors in lower returns. The United States now has the highest corporate‐tax rate in the world among major countries (35 percent plus state corporate taxes), which is causing many corporations to move elsewhere. The Obama Treasury Department is trying to penalize corporations to keep them from moving, making them even more noncompetitive.
The Canadians and British, who have more rational economic leadership than the United States, have taken the constructive approach to global corporate‐tax competition by reducing the maximum rate to 15 percent in Canada and 20 percent in the United Kingdom. As a result, they have a surge of corporations moving to their countries, and their corporate‐tax revenues are a higher percentage of GDP than they are in the United States. The average international corporate rate is now about 22 percent; the Irish charge only 12.5 percent, and a number of countries have even lower rates.
The Republicans are promising tax reform. Recently, Sens. Marco Rubio of Florida and Mike Lee of Utah made a constructive proposal, particularly on the business investment and saving side. They were constrained by the potential revenue loss number as projected by the static‐minded congressional tax‐revenue estimators. However, they and others should be bolder as were Reagan and his ally, Jack Kemp.
At a minimum, the maximum individual tax rate should be brought down to 28 percent and, ideally, to 20 percent. The corporate‐tax rate should be reduced to a minimum of 20 percent and, ideally, to 14 percent, which is the optimum corporate rate, according to the highly regarded, dynamic‐thinking economists at the nonpartisan Tax Foundation. Real tax reform can never take place if those in Congress allow themselves to be chained down by the zero‐sum static thinkers.