We could definitely use another Abraham Lincoln to emancipate us all from being slaves to words. In the midst of a historic financial crisis of unprecedented government spending, and a national debt that outstrips even the debt accumulated by the reckless government spending of previous administration, we are still enthralled by words and ignoring realities.
President Barack Obama's constant talk about "millionaires and billionaires" needing to pay higher taxes would be a bad joke, if the consequences were not so serious. Even if the income tax rate were raised to 100 percent on millionaires and billionaires, it would still not cover the trillions of dollars the government is spending.
More fundamentally, tax rates-- whatever they are-- are just words on paper. Only the hard cash that comes in can cover government spending. History has shown repeatedly, under administrations of both political parties, that there is no automatic correlation between tax rates and tax revenues.
When the tax rate on the highest incomes was 73 percent in 1921, that brought in less tax revenue than after the tax rate was cut to 24 percent in 1925. Why? Because high tax rates that people don't actually pay do not bring in as much hard cash as lower tax rates that they do pay. That's not rocket science.
3 comments:
comparing historic tax cuts from 73% to 24% to the current proposed 3-4% tax adjustments is comparing apples to oranges. Not to mention we also had historically weak job growth under the Bush tax cuts.
If one reads the whole article, and understands the point being made, one would have an explanation as to why, as we continue to tax the rich as penalty for their success, it becomes the lower income earners who pay a larger percentage of income taxes. Every time taxes are increased, knowledgeable, thinking people find alternatives. That's why VA and DE sent thank you letters to MD officials each time they've raised cigarette taxes - their tax revenues went up as MD's declined.
The article makes a point but uses examples that are not operational in the current "real world". Not to mention he draws broad conclusions (i.e. low taxes equal increased revenue and growth) while disregarding events that had a huge amount of influence (ex. dotcom boom of the 90's)
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