Marginal Tax Rates

I'm on basically the same boat as Greg Mankiw (though not as far along) and his analysis of his marginal tax rates (no matter who wins the election) is sobering. Considering the four main taxes that we pay on money we earn and then intend to leave to our heirs:

If there were no taxes, so t1=t2=t3=t4=0, then \$1 earned today would yield my kids \$28. That is simply the miracle of compounding.

Under the McCain plan, t1=.35, t2=.25, t3=.15, and t4=.15. In this case, a dollar earned today yields my kids \$4.81. That is, even under the low-tax McCain plan, my incentive to work is cut by 83 percent compared to the situation without taxes.

Under the Obama plan, t1=.43, t2=.35, t3=.2, and t4=.45. In this case, a dollar earned today yields my kids \$1.85. That is, Obama's proposed tax hikes reduce my incentive to work by 62 percent compared to the McCain plan and by 93 percent compared to the no-tax scenario. In a sense, putting the various pieces of the tax system together, I would be facing a marginal tax rate of 93 percent.

Lame.

Note that the difference between the no-tax \$28 and the with-tax \$4.81 or \$1.85 isn't completely turned over to the government... most of the wealth is simply destroyed because the government doesn't invest it and earn a return, it spends it on depreciating assets and redistributes it to people who do likewise. The government is the great destroyer of wealth.

Maybe I'll take the afternoon off.

(HT: Instapundit.)