Let’s put aside for a moment President Obama and the Democrats’ class-warmongering rhetoric about wanting “millionaires and billionaires” to pay their fair share (I’m pretty sure that dubbing families that make over $250k/year “millionaires” is an over-generalization, but yeah, sure), and forget that the projected revenue from hiking taxes on the wealthy is a laughably insincere, piddling effort at solving our wildly out-of-control binge-spending problem. Let’s just focus on the universally acknowledged wisdom that, when you want less of something, one always-viable option is to put a tax on it.
Exhibit A, via the Telegraph:
In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs.
This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election. …
George Osborne, the Chancellor, announced in the Budget earlier this year that the 50p top rate will be reduced to 45p from next April.
Since the announcement, the number of people declaring annual incomes of more than £1 million has risen to 10,000. …
Far from raising funds, it actually cost the UK £7 billion in lost tax revenue.
I.e., wealthy Britons probably invested a lot of resources into either reducing their taxable incomes or simply moving abroad — and no doubt our own dear Democrats would label this rational self-interest as malicious greed or a disdainful lack of patriotism. Whatever they want to call it, they can’t disguise the fact that the threat of more of your money being taken from you means you’re going to look for ways to avoid that fate — and when it starts to get really serious, there’s a disincentive to even try and make that much money in the first place.
Maybe these higher taxes alone might not spell economic doom and recession for the economy, but they certainly don’t encourage it along, and combined with the rest of President Obama’s agenda of more bureaucracy, more regulation and red tape, more costs, more redistribution, and the list goes on… These together are long-term trends for economic decline, and it’s not like ‘nobody could’ve seen this coming’ or anything.
This is the infamous Laffer Curve, and it’s simply the common-sense recognition that you should include changes in taxable income in your calculations when trying to measure the impact of higher or lower tax rates on tax revenues.
…[L]et’s now think about President Obama’s proposed class-warfare tax hike. He wants higher tax rates on investors, entrepreneurs, small business owners and other “rich” taxpayers. And he wants more double taxation of dividends and capital gains. And a higher death tax rate, even higher than the ones imposed by France and Venezuela. …
Those questions are hard to answer. Ask five economists and you’ll get nine answers, but there is compelling evidence that higher tax rates do have a negative impact.