>I assume this would be a regressive adjustment in the tax base. I have
>often heard that the US budget surplus was, in part, a result of a change
>in taxation during the mid-1990s, capturing a significant part of the
>stock market gains. Is this true?
About the only good thing Clinton ever did was to raise taxes on the top 1-2% of the distribution, from a marginal rate of 36% to 39.6%. This boosted revenues somewhat, but extremely high capital gains and a generally strong economy have probably had a greater effect than that rate boost.
>Secondly, how would a tax cut correct the savings rate?
Cet par (though as Joan Robinson said, cet is rarely par) a tax cut would reduce the national savings rate, because the government would run smaller surpluses.
> Do you mean that a
>cut in taxation would allow people to put money which was previously spent
>on taxes into savings? Wouldn't any surplus money being added to the pot
>at present just fuel further recklessness?
Rich people aren't reckless. It's only poor people who are reckless. Therefore the great incentive asymmetry: to get rich people to work harder, pay them more; to get poor people to work harder, pay them less.
Doug