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It was interesting, but I'm not going to say it was entirely accurate. Such things, written to show a partisan point, hardly ever are: What they leave out is often as important as what's included.
In any event, the claim was simple: As the highest tax rate declined, the amount of money sheltered also declined. The amount paid (I forget if it was dollars adjusted for inflation or percentage of all income taxes paid or percentage of income paid per househould) stayed remarkably the same. In years immediately after a change there was usually a change, which vanished after a couple of years as households adjusted their investment/tax-avoidance strategies.
The secondary claim was that tax avoidance, beyond some simple measures, is usually messy, and has a certain level of discomfort associated with it in the US. You either take a reduction in income, or you make funds less accessible, or you have to monitor them more closely. Tax payment also has a certain level of discomfort associated with it (for all the quoting of 'paying taxes is patriotic', everybody's in favor of not only tax cuts for their tax bracket, but often refundable tax credits, which tacitly gives "tax cuts" an entirely new meaning).
The inference was also simple: The two kinds of discomfort will tend to stay in equilibrium. The top tax rate doesn't much matter, after a certain point: People will adjust tax avoidance (which is different from tax evasion) so as to yield a fairly constant kind of payment; you alter the top rate, you get, at most, a 2-3 year change in the tax receipts for the upper tax bracket, and after that you're back at status quo.
While I'm not sure that the numbers they cited were correct, the prediction seems to point in the right direction: If the marginal rates are higher, there's more to be gained from the effort of avoiding taxes in future years, and the savings "pay" for additional effort. If the marginal rates are lower, there's less to be gained from the effort, so you get less effort devoted to the task.
Take my mother as an example. She'll have a lot of US savings bonds mature next year, a lot more than this year. She has a choice: She can let them mature, and claim the interest on her 2009 return. Or she can cash some in this year and average the interest between 2008 and 2009. To do this she'll have to estimate her 2009 tax return, and probably re-estimate her 2008 taxes. This means she'll probably wind up having to pay higher estimated 2008 taxes, and that might trigger a penalty of some kind. This is messy and uncomfortable. However, the marginal rate between the top two rates is fairly low, so the difference she'd pay if she waited until next year to redeem them all isn't really all that high. While it's distasteful to pay more when you're in your 80s, it's also distasteful to have to crunch through all kinds of hypoethetical numbers for next year. The result: A rough, I mean a really rough, estimate shows that her savings wouldn't exceed maybe $1000. The effort and return on the effort aren't balanced for her; she'll be "patriotic".
If you made the difference between tax rates higher, she'd average them for sure, avoiding taxes. Note her family is far from being in the top 5% of households, as well (although, like most in the top 5% or top 1%, she and her husband were in it for a year or two before dropping back down to their current percentile).
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