The higher tax rates that President Barack Obama wants to impose on the wealthy, won’t generate more revenue for the government from them, writes Stephen Moore, a member of The Wall Street Journal
That’s because higher rates on the wealthy would slow the economy down, giving them less income and thus cutting their tax payments, he says. The solution is to cut tax rates, which would strengthen the economy, provide more income to everyone, and thus boost tax payments from the wealthy.
“The country needs an economy that will create more of the ‘millionaires and billionaires’ that Mr. Obama loves to excoriate, not more taxes from those who already exist,” Moore says.
“Total taxes paid by millionaires fell by almost $100 billion between 2007 and 2010. The drop resulted not from too-low tax rates, but from the severe recession and an anemic recovery since 2009 that thinned the ranks of the wealthy.”
The history of the last 100 years is that “lower rates have shifted the tax burden onto high-income earners and away from the middle class while maintaining the tax code's progressivity,” Moore writes.
President Ronald Reagan cut taxes across the board in the 1980s, with the top rate sliced to 28 percent from 70 percent. The economy boomed and taxes paid by those Americans in the top bracket rose every year during the decade’s expansion, Moore says. The portion of taxes paid by the top 1 percent gained to 25 percent in 1990 from 18 percent in 1981.
The economic growth created through lower tax rates over the years has benefited the middle class too, Moore says.
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