Higher Taxes or Increased Revenue: Which do You Want?

Big government statists make the common mistake of confusing taxes and revenue. They are not the same thing

Taxes are an assessment by government on your earnings. Revenue is the money flowing to the US treasury as a result of taxation. There is not a direct correlation between the two.   In fact, government data shows that often it is an inverse relationship.





Liberal Nostalgia

Poor liberals, staggering blindly around Left and Right Blogistan, suffering under the crack-brained theories of a Robert Reich or Rachel Maddow, parroting nonsensical "theories."  The latest shiny ideological bauble that has enraptured Left Blogistanis is the idea that government can restore fiscal sanity by returning to the sky high tax rates of the 1950's.

Why 70% Tax rates won’t work

...and this is what Mr. Reich and his friends always fail to mention—the individual income tax actually brought in less revenue when the highest tax rate was 70% to 91% than it did when the highest tax rate was 28%.

President John F. Kennedy's across-the-board tax cuts reduced the lowest and highest tax rates to 14% and 70% respectively after 1964, yet revenues (after excluding the 5%-10% surtaxes of 1969-70) rose to 8% of GDP. 

President Reagan's across-the-board tax cuts further reduced the lowest and highest tax rates to 11% and 50%, yet revenues rose again to 8.3% of GDP. The 1986 tax reform slashed the top tax rate to 28%, yet revenues dipped trivially to 8.1% of GDP.  (WSJ - Alan Reynolds)

So Robert Reich and his fellow travelers are peddling a cartload of statist crap.  The other factor these petty statists ignore is that in the 1950's we were the only viable post-WWII economy still standing.  We weren't just the only game in town, we were the only game in the world!  The rich had few options to hide their money from the avaricious clutches of the US government. Nowadays, the wealthy have a global smorgasbord of tax avoidance options.  They won't just sit here and take that level of taxation.

Our tax code is an incoherent mess. Half pay no income tax, the rich escape it, the working class cannot, businesses keep their money overseas to avoid US taxation, and friends of Obama like GM poobah Jeffrey HeMelts pay no taxes at all.

Caroline Baum lays out the solution quite nicely:

The solution, of course, is “the lowest rate on the broadest base with the least incentive to avoid, evade or not report taxable income,” Laffer says.

And once we find that illusive rate, let’s leave it there. Walk away. Forget about it. Tax policy, almost all experts agree, should be designed to raise revenue for necessary government programs as simply and as fairly as possible while minimizing economic inefficiency.

As things stand, tax policy is informed by special interests and implemented by lawmakers in the service of those interests. What’s good for one isn’t good for all, which is why tax uniformity should be the goal.

But no, some progressives don't care about facts and numbers, they just want to punish the rich, even if it results in less revenue flowing into the treasury, higher unemployment, and tax breaks for friends of Obama.

Picture yoinked from The Astute Bloggers