Raising Taxes on the Rich — Revisited

22 May

Interested in your perspective:

People who say that the “rich” should pay a higher tax rate, and that the added tax dollars this would bring in could then be used to reduce the deficit, assume that higher income tax rates equal higher income tax revenues. But much of the evidence supports the reverse conclusion.  And higher rates would most certainly reduce private sector investment, the lifeblood of our great economic system.

First, let’s be sure we understand that the “rich” ALREADY pay income taxes at higher tax rates than the not-so-rich, and that nearly half of Americans pay no income tax at all.  Second, let’s understand that even if this tactic did have the effect of increasing tax revenues, the additional amount it would raise would be insignificant against the reduction of the monstrous deficit we run.  Obama and his administration, and all our congressmen, know this, but they try to avoid proclaiming the tax rate differences now, in order to make their “fairness” argument sound more convincing.  Third, I’m thinking we can concede the point that more money paid in taxes would, by definition, mean less money invested BY the private sector INTO the private sector — i.e., job creation could fall.

And fourth, there is substantial evidence from the past that tells us that when we raise marginal tax rates on high-earners, those high earners withdraw their money from productive business investments and move it into tax-exempt instruments or other means of reducing the tax bite.

The same liberals who complain about Mitt Romney’s Cayman Islands account are oddly blind to the fact that raising tax rates on high-earners will simply push more money out of the U.S. – and along with it, investments and jobs.

We already face the situation where, instead of having a net positive investment in the U.S. from domestic and foreign investors, we now have net negative investment – the net flow of investment is OUT of America, to places with lower tax rates.

Even Obama admitted during the last campaign that raising tax rates does not necessarily result in an increase in tax revenue.  So why the push?  My conclusion would be that he thinks this kind of class warfare moves a net positive number of voters into his column. 

What do you think?

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