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Originally Posted by Undertoad
It's more like an economic truism: at some point, higher tax rates lead to lower tax revenues.
Some people do not see a need to make all that money if they are going to turn over more than half of it. Other people simply go where the money can be made more easily, which is more possible than ever on our flat earth. The loss of this activity leads to less investment, in turn fewer jobs, and eventually even brain drain as smart people start to emigrate. Then there is less money to tax, and tax revenues fall.
To really get higher tax revenues, what you want is maximum economic growth. Clinton did not really raise taxes much to rid us of the Reagan/Bush deficits. Growing the economy solved the deficit as it floated all boats. |
Both GHW Bush and Clinton raised the marginal tax rate on the top bracket. Bush took it to from 28% to 32% and Clinton raised that to 39%.
A huge part of the current debt is due to G Bush lowering it back to 35%, resulting in a loss of nearly $1 trillion in revenue over the course of his term.
By making it permanent, as the Republicans are proposing, the only result of the significant cuts in spending they are proposing will be to offset the continued lost revenue if the top tax rate remains the same.
Yes, spending cuts are a necessary component of the equation, but you cant balance the budget simply by cutting spending in the manner which is being proposed, which will not "grow the economy" but simply burden the middle class and working poor, many of whom are already living from paycheck to paycheck or worse.
Economic growth requires both investing by the govt (in both people and programs that incentivize growth, like R&D, education, etc to make the US more competitive once again) AND raising taxes on the top wage earners (restoring the Clinton era rate) and eliminating excessive corporate tax breaks.
Bush I got it, Clinton got it, Bush II did not, nor does the current Republican majority in the House.
And lastly, as to the notion that raising taxes on the rich by a few percentage points will act as a disincentive to aspire to more wealth, I never met anyone who doesnt want to make more money, even if it results in marginally higher taxes.
There is a reason why every advanced economy in the world has a system of progressive taxation, where the wealthiest pay a marginally higher rate......it works.