In 1936, the US government began circulating a series of pamphlets to explain its brand new Social Security program, plus the associated taxes. Initially, the Social Security tax was set at 2%. The government promised it would rise to 3% in 1949, with no additional increases EVER:
“[F]inally, beginning in 1949. . . you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay.”
In 1949, the tax rose to 3% as scheduled. But it only took five years for the government to break its promise. The tax rose to 4% in 1954, 4.5% in 1957, 5% in 1959… and continued to rise for decades. On January 1st it will be 12.4%.
Politicians routinely make bold promises about tax policy… and they almost always end up being lies. Raising taxes, i.e. plundering the wealth of citizens, is one of the oldest tactics in the playbook for insolvent governments, and you can be 100% certain that your taxes will increase despite any promises to the contrary.
Perhaps most dangerously, politicians fail to understand that raising tax rates does NOT actually increase government tax revenue.
In the US, for example, government tax revenue has consistently been 17.7% of GDP since the end of World War II, plus/minus a very tight band. Similarly, the British government has consistently collected 35% of GDP in tax revenue.
Yet over the decades, tax rates have been all over the board… from 0% to over 90%! Plus variations in corporate profits tax, payroll tax, estate tax, capital gains tax, dividend tax, and (for the Brits) VAT.
Rates go up, rates go down… it doesn’t affect overall government tax revenue one bit. Despite the obvious facts, though, politicians keep raising tax rates.
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