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Opening Arguments

Up, up and away

Is anybody really shocked by this?

Taking into account all taxes on earnings and consumer spending—including federal, state and local income taxes, Social Security and Medicare payroll taxes, excise taxes, and state and local sales taxes—Edward Prescott has shown (especially in the Quarterly Review of the Federal Reserve Bank of Minneapolis, 2004) that the U.S. average marginal effective tax rate is around 40%. This means that if the average worker earns $100 from additional output, he will be able to consume only an additional $60.

Actually, I am, a little. I would have said closer to 50 percent. And let's not kid ourselves. Taxes are going up for everybody, not just the top 1 percent. We get what we vote for.

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