Becker: Why Raise Tax Rates For The Rich?
A few decades ago, tax rates on higher incomes were at least 70% not only in high taxing Scandinavian countries, but also in the United States (where the top rate was 91% in 1960) and many other countries where government spending took a relatively small share of GDP. The widespread avoidance and evasion of such high taxes through sophisticated accounting methods, reduced work effort, and even in countries like Sweden through outright barter for services and goods, led to a world wide revolution toward flatter and much lower tax rates. The bi-partisan tax accord in the US in the 1980’s reduced the top income tax rate to 28% (the top rate was 33% for a fraction of high income persons), and even Sweden lowered its top income tax rate to about 55%. Since aside from the Great Recession, GDP has grown quite rapidly during the decades subsequent to the tax reduction movement, why is there growing pressure to raise tax rates again on the so-called “rich”?
Entire post worth reading. Posner here.
why is there growing pressure to raise tax rates again on the so-called “rich”?
Because so-called Progressives, Liberals and advocates for the poor; proponents of Big Government and Left-wingers need resources to fund social engineering and intervention into peoples’ lives. These groups also believe redistribution to the most direct route to equity. They — implausibly — think the rich so stupid that they will willingly stand idly by and allow themselves to be milked of their resources. The aforementioned left-of-center advocates somehow believe this bleeding the rich won’t trickle down and harm those who depend on business, industry, capital investment, etc. for jobs.
Maybe I’m making this analysis too complicated. Maybe those who have careers in disciplines that promote Big Government and redistribution merely promoting job security for themselves. After all, every time there is a locally proposed property tax (or sales tax) increase, the firemen, policemen, teachers and local public employees are out in force promoting and voting in favor of it.
Is there evidence that wealthier people worked less under the Clinton tax rates than they did under the current tax regime? That seems to be a common argument for why tax increases would lead to less revenue, but I don’t see that working when we’re dealing with relatively small increases (on the order of 5% as the return to Clinton-era tax rates for the wealthiest would be). A lot of the hysterical arguments against that type of increase just seem to be the stuff of a Randian fantasy world that has no connection to reality.
Also, can a flat tax advocate explain how these policies could be implemented without raising taxes on the lower or middle classes? It seems to me that if you are going to make such a significant cut in the top marginal rate, you are going to have to increase the rates on lower earners in order to avoid blowing out the deficit further (unless you think that a flat tax will unleash an incredible wave of prosperity and increase revenues dramatically, which seems fairly optimistic). Although given all the rhetoric I hear from the right, it seems like many of them are in favor of raising taxes on less fortunate Americans.
Excellent points, Buster. The Left never ceases to amaze me with their creativity in finding ways to redistribute wealth.