Phil Hauck's TEC Blog

Saturday, January 8, 2011

More on the 'Tax The Rich' Debate ,,

I’ve read lots of tax and economic research articles recently that support the argument that tax rates have consequences … and that significant tax increases actually reduce revenues, not increase them. (This obviously flies in the face of Administration and others’ arguments that consumers don’t react and a rate increase does result in increased tax payments, the so-called “static” scenario.)
The latest: Oregon has already gone and done what President Obama wishes … two years ago raising its state income tax rate on the wealthiest … to 10% on joint-filer income between $250,000 and $500,000, and 11% above that. Only New York City’s tax is higher.
Result: A year later it collected $50 million less than it had the prior year … $130 million vs. $180 million. The wealthy have alternatives … moving out of the state, which happened in Oregon, developing alternative investments that have lower tax rates, leaving investments alone so there isn’t income, etc.
As we all know, the base reason for “taxing the rich” is a fairness/equality argument … sharing the wealth from those who have accumulated it to those who have not. Raising revenue to lower the deficit is a secondary reason. But how much is “too much”? The top 1% already pay 20% of total taxes, and the top 2% 40% … the highest progressive rate situation in the world. When will our Congressional reps be gutsy enough to tackle the spending side in the ways it needs to be, and tell it to us straight?

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