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Bill Gates Speaks Out on Marginal Tax Rates

When Bill Gates comments on public policy, people tend to listen. So we hope that when he appeared last Sunday on Fareed Zakaria GPS and spoke at length on multiple issues facing our country’s economic future, notably our marginal and corporate tax rates, politicians of all stripes were paying attention.

Gates told Zakaria, “The idea that there’s some direct connection that all these innovators are on strike because tax rates are at 35 percent on corporations, that’s just such nonsense.”

We couldn’t agree more. Creating a society that can effectively foster economic growth is a costly endeavor, yet for the last 70 years the marginal tax rates, a primary source of funding for this type of development, have been cut time and time again.

In the chart below, courtesy of Politifact, we see the average GDP growth per decade juxtaposed next to the highest marginal tax rates for that period:

Notice a trend?

In order to fund a government that can meet the challenges of the 21st century, we must create a more progressive tax code. By raising the marginal tax rate for corporations and the wealthiest among us, we could keep rates lower for middle and working class Americans. This would enable them to take home more of their hard earned income, thus ensuring their ability to participate in the real economy, which in turn further facilitates national economic growth. If we return the marginal tax rates for those in highest income brackets to previous levels, we’d be able to offset the tax burden on working Americans while still raising the needed revenue for necessary improvements to national infrastructure and social safety net.

When the government spends money on social programs, infrastructure improvements, and investments in research and education, it leads to a virtuous economic growth cycle. This cycle creates opportunity and prosperity for all, instead of just padding the bank accounts of the wealthy few.