Mr. Gold says that cutting marginal tax rates on the wealthy does not cause them to work “harder.” But how does he measure this? Most upper-income people are already working full time (or overtime), so of course they cannot work longer hours. However, they can start new enterprises, and they have more to invest, when their tax load is reduced.
Investment by individuals is done through the market process, and is thus more efficient that government “investment” or the results of “targeted tax cuts.”
It is efficient investment which improves the economy. Heavier taxation merely destroys potential capital, or misapplies it (which amounts to the same thing).
Always remember the fundamentals: capital is tools. People with tools multiply the results of their efforts. People with labor alone (bare hands!) can barely survive. Indeed, in most places, and at most times in history, people without tools starve and die out; or they may be enslaved by their neighbors.
One thing which distinguishes humans from animals is that humans have and use capital. Taxes limit and destroy capital. Income taxes, corporate taxes, and inheritance taxes are systematic handicaps to an economy.
Mr. Herbert Gold is a sophomore in the original sense of the word: a wise fool. He can make tables and graphs, but is unable really to demonstrate causality in his arguments. It is because he seems not to understand economic theory.
He quotes several studies which could not fund that marginal tax rates make any difference to the economy. This is pure idiocy. If marginal tax rates make no difference, why don’t we raise them all to 100%? Obviously they make a difference.
Here is one way: high marginal rates drive a certain proportion of the people from being tax-payers, to being dependents and beneficiaries of state spending. Such people are now no longer in the tax-payer category, so their misfortune is no longer detected by such dumb studies as those cited by Mr. Gold.
It is incredible that misinformed people like Mr. Gold actually have the public ear on things which he so little understands. I find it difficult to keep a polite tone when contemplating such ignoramuses.
Even if one ignores the psychological effects of tax rates, one should consider what rich people do with their money. Generally, they want to use it to make more money, which means that they invest it in things which will generate wealth. Any dollar the government steals from a rich person's pocket is a dollar the rich person won't have to invest in a wealth-generation enterprise.
While it's true that rich people don't feed all of their marginal income into investments and wealth generation, so stealing $1 from someone won't reduce the investment in wealth generation by a full dollar, the percentage of a rich person's marginal income which gets fed into wealth generation is apt to be much higher than the percentage of government money that funds wealth creation.
Taking money from people who would use it to generate more wealth, and giving it to people who will regard it as an encouragement to become more dependent upon government, could not possibly be a recipe for prosperity, even if it had no effect on wealth generators' work ethic. Can anyone offer a plausible explanation of how wealth is supposed to be created if capital is taken from those who would effectively use it to create wealth?