Tax Collapse

I've talked a lot about the way that making our tax system more progressive has made tax revenues more volatile--they're higher when the economy is booming, and lower when the economy is in depression.  But even I am struck by this image from the Congressional Budget Office:
 tax revenues.gifIncome taxes, especially corporate income taxes, are sharply off. But revenue from the payroll tax, which is our most regressive, basically hasn't dropped at all. 

There are a lot of reasons why we can't pay for all the new spending Obama wants just with taxes on the rich, but this may be one of the most compelling:  if we do, we'll be forced to borrow massively every time there's a slowdown.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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