if taxes were more progressive, would total output be affected?

Answer 1

More progressive taxes means that tax rates would be higher at higher income than they are now.

In theory, whatever you tax you discourage. Thus, a more progressive tax would reduce the economic incentive for individuals and businesses to earn more taxable income. As a result, national personal income should grow more slowly and so would GDP.

In practice, it gets more complex. During the Clinton years in the nineties, Clinton made the U.S. income tax a lot more progressive by raising the upper brackets significantly. But, the U.S. economy actually did really well. This was due in part to Greenspan's monetary policy being reasonably accomodating. Also, labor productivity rose rapidly. All those factors contributed to increasing GDP.

If you compare the U.S. vs Europe, the U.S. has a much less progressive tax structure. And, the U.S. economy has steadily grown much faster than Europe's. So, on an international standard you can easily argue that a less progressive tax structure contributes to a faster economic growth and vice versa.

Domestically, as mentioned the case is complex with the Clinton years showing strong performance despite an increase in the progressivity of the tax structure.

In economics there are so many different levers than can counteract each other that it is often difficult to forecast with much precision what will be the impact of a given fiscal policy (change in tax structure. That's why economics is called the dismal science. Does not mean it is not fascinating stuff. It clearly is.

Answer 2

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Answer 3

More progressive in what way? And more progressive for individuals or corporations?

Answer 4

Never thought about it too much