Why 70% Tax Rates Won't Work

WSJ ^ | 6-16-2011 | Alan Reynolds

[WOBBLY BOB]

The intelligentsia of the Democratic Party is growing increasingly enthusiastic about raising the highest federal income tax rates to 70% or more. Former Labor Secretary Robert Reich took the lead in February, proposing on his blog "a 70 percent marginal tax rate on the rich." After all, he noted, "between the late 1940s and 1980 America's highest marginal rate averaged above 70 percent. Under Republican President Dwight Eisenhower it was 91 percent. Not until the 1980s did Ronald Reagan slash it to 28 percent."

[WOBBLY BOB]

That's a tall order Mister Reiccchhhhh.

[Paladin2]

Dear Bob, high rates are going to come up short on total revenue. You should know a lot about coming up short.

[KarlInOhio]

You can get away with a very high tax rate if the rest of the industrial world is a smoking pile of rubble. It's like being the only bar in town and serving overpriced, watered-down drinks. Right now we are competing with every other country in the world, many of whom would welcome our millionaires as economic refugees. Also when tax rates were that high a lot more deductions were available, so few actually paid that much, they just hid their money in various tax shelters.

(I would love to get a copy of the tax instructions from the 1950s or 1960s.)

[FreeMaine]

Union scum want people to stop paying their mortages, in an efffort to banrupt the system.

I say, let’s stop paying taxes and let’s bankrupt the corrupt governments.

[SMARTY]

The industrialists in America will have to close their doors, or leave.

Not good. It’s worse than not good... it is institutionalized theft and patently seditious.

[griswold3]

hauser’s law
no matter the tax rate, revenue will not exceed 20% GDP.

[sickoflibs]

If I was Boehner I would put up a bill setting a 100% income tax on ‘the rich’ instead and see if House Democrats actually vote for it.

I saw some House progressives on MSNBC Cenk Uygur show calling on Obama to campaign for a massive federal public works program that hires, get this, 3-4 million new federal employees. My favorite part (why I watch it) was the rationale, here it is with my comments:

1) A massive federal public works program would get the economy moving by putting money back in people's pockets and get them spending again creating demand creating more jobs
(does the buggy really pull the horse?)
2) A massive federal public works program would cut the deficit because those people would pay more taxes than they do getting unemployment compensation and other welfare programs.
(Riddle : If the IRS makes 30 cents on every dollar the government spends on government salary and benefits how many goverment workers do we need to balance the budget?)

Ya think that would work ?? LOL

[New Jersey Realist]

I think there should be a flat federal tax rate for EVERYONE - including those living on the cash they take from us in the form of welfare - and there should be no exemptions or loop-holes of any kind. The tax should be a deduction of pay eliminating the need for filing a return. Think of the money this country could save by eliminating or greatly reducing the IRS. The only problem I see is how would we know if business owners were being honest.

[CitizenUSA]

Can you imagine the economic destruction if they eliminated deductions and raised the rate to 70% for high earners?

First off, it wouldn’t hurt the wealthy. They already have their millions. It would simply stop nearly everyone else from joining the ranks of the rich. Unless you’re a popular Hollywood actress or sports star, your odds of ever amassing a fortune would be slim. Work 16 hours a day to build a small business? Not worth it.

Secondly, anyone with a high income would have very little incentive to work harder past a certain amount. Even at the current rates, people have a disincentive to work. For example, unless the spouse of a high earner also makes a substantial salary, they often end up working for little real gain.

[Aevery_Freeman]

There are a variety of reasons you can't tax a rich guy:

• who owns the government - the rich or the poor?
• they will just pass the cost along
• they will not work as hard
• they will use lawyers and accountants to minimize taxes
• they will "cheat"
• most didn't get rich by being stupid (unless they inherited it)

Just to name a few.

But it sure makes liberals feel good and makes the moochers vote for the looters.

[Gilbo_3]

(Riddle : If the IRS makes 30 cents on every dollar the government spends on government salary and benefits how many goverment workers do we need to balance the budget?)

not a problem if ya give em all a gubmint motors car and CC and also tax the gas they buy another $5/gal...

[The Theophilus]

Union scum want people to stop paying their mortages, in an efffort to banrupt the system.

Interesting. So the union thugs want more cash and benefits while also threatening to stop paying for their own housing which they expect to keep in an economic crash.

Sure that is going to happen.(sigh)

I have a better idea. Bankrupt the union thugs and then kick their sorry evicted asses to the curb when they default on the homes they intended to steal.

I used to care about jobs being outsourced because I'm in IT and no one except IT people cared when our well compensated gigs went overseas. For a generation now, union thugs wanted me to care about preserving their well compensated gigs so I can understand it. But while I was watching IT departments get downsized and having to sit through endless early morning or late evening conference calls to synchronize with teams in India, I'm not calling for the destruction of my home and my neighbor's home. I'm not demanding that the country be taken over by godless Marxists and Progressives who want to see me dead and have a thousand plans in the works to achieve that goal.

Its time to introduce the union thugs to reality. Crush the factory rats by sending the gigs to Latin America and hope the illegal aliens go home to work there. I'll work overtime if necessary to develop a K-12 education system that can be fully administered and facilitated on networked computers to eliminate as many union teaching jobs as can be achieved. Law Enforcement is now completely a complementary component of the criminal gangs, existing only to collect tax revenue for our overlords while simultaneously beating down and subduing the general population to foster a safer work environment for the rapists, murderers, junkies and robbers. Advocating strong 2nd Amendment legislation and providing the vigilante the same legal defense that LEOs get when they commit serial senseless murder ought to thin out the feral criminal culture while greatly diminishing the need for the government's union thug gangs.

Now excuse me while I cook up some ideas on how to decimate the SEIU and public sector union gigs.

[annieokie]

"""""I think there should be a flat federal tax rate for EVERYONE""""

THE PUBLIC DOLE/WELFARE CREEPS, STILL WILL NOT HAVE TO PAY ANYTHING. What are they going to pay with?

I am more in favor of the Fair Tax/consumer tax on everything except Homes. With this tax/EVERONE DOES PAY.

Now the other problem, where do they set the Percentage Rate, and where does it stop, how high will it go.

No matter what system we use, OUR GOVERNMENT will never have enough, and that's just a FACT. They may entice you to a new system with a say 20% rate, once it's in, the sky is the limit. Nothing is going to work or stop the CASH HOGS IN WASHINGTON.

We will not get another system until CONGRESS has figured out how they will not have to participate personally, it will be in the fine print, you can bet on it.

As with other bills they have passed and say: Look what we gave you. Yippeeeeee finally, UNTIL, UNTIL a little down the road do we really see what they exempted for themselves. TOO LATE.

Now we get another Congress, and they correct the last bad bill, only to insert their own set of exemptions, ON and On it goes, they are just CORRUPT to the bone and it will never be any differant.

Our Conservative Congress are as responsible as any other, as with most bad bills, they don't have to take the blame. They know we will blame the Democrats, (and the D's don't care), but the R's are eager to get their own little cut and tell us "Well, I voted against it", good little boy and for that we will re-elect you. B.S.

The Republicans don't want to be in charge, for they would have to be held accountable. Until the Republicans get in there and SLASH AND CUT as we want them to, they are no differant than a Democrat Lite.

[silverleaf]

Let’s just have all the rich pay the same rate as Barry and Meshell

Last year it was 26%

[ctdonath2]

let’s stop paying taxes and let’s bankrupt the corrupt governments.

Seems that's their goal. Anyone making enough to get taxed at 70% can decide not to make anything for a while - and pay 0 taxes. Suicide by taxpayer?

[ngat]

“First off, it wouldn’t hurt the wealthy. They already have their millions. It would simply stop nearly everyone else from joining the ranks of the rich.”

Exactly on point, and it took several posts for the primary counterpoint to Reich’s be brought up: “rich” should only be defined as ownership of assets, especially income-producing assets, and more particularly net worth. (Assets minus liabilities). Income is, in a way, just a snapshot in time of a productive person’s life. Reich proposes to grab 70% of it.

[Pearls Before Swine]

You can't squeeze much more blood from the income tax stone for a variety of reasons. First, experience has shown that higher rates foster tax avoidance. Second, 70% Federal rates imply marginal rates (including deduction phaseouts, state and city taxes, Social Security payment taxation) of close to 100%. And, finally, the real money is in assets.

I will be disgusted, but not surprised, when the government proposes a "one time" net asset tax to reduce the debt "once and for all", and if this occurs, I would further look for it to be requested every few years.

[pnh102]

You can get away with a very high tax rate if the rest of the industrial world is a smoking pile of rubble. It's like being the only bar in town and serving overpriced, watered-down drinks. Right now we are competing with every other country in the world, many of whom would welcome our millionaires as economic refugees.

You nailed it. Rich people realize they have literally hundreds of countries from which they can purchase government services. Right now, the USA has some of the world's highest levels of personal and corporate taxation when compared to other countries. Why pay extra when you don't need to?

[redgolum]

For later.

[doc11355]