Obama’s money misunderstanding: Raising revenue by raising taxes doesn’t work

Washington Times ^ | 12/18/2012 | Richard Rahn

[SeekAndFind]

In times past, political leaders would lay out their domestic and foreign policies in clear, coherent terms. President Obama talks about getting our fiscal house in order but fails to propose any meaningful spending cuts. His proposals to increase the tax rate on the top 2 percent of taxpayers would fund the government for eight days, assuming no behavioral change by those whose feathers are being plucked.

In the real world, we know people will spend a great deal of time and effort to avoid paying high marginal tax rates. In high tax states such as California and New York, high earners will be expected to pay marginal tax rates well over 50 percent.

We only need to look at what happened in Britain after the former Labor government of Gordon Brown increased the top rate to 50 percent. In the tax year 2009-10, more than 16,000 people declared an annual income of more than 1 million British pounds. This number fell to 6,000 after the tax rate was increased, partially because two-thirds of those who earned 1 million pounds or more left Britain to avoid the top rate. George Osborne, the current finance minister, just announced that the Conservative government will reduce the rate in order to obtain more revenue.

Mr. Obama seems to have forgotten that Christina Romer, his first chairman of the Council of Economic Advisers, and her husband, economist Paul Romer, had done studies showing that income tax rates above 33 percent bring in no extra revenue because people adjust their behavior to avoid the high taxes. Other credible researchers have shown the revenue-maximizing rate to be even lower — in the 20 percent to 30 percent range.

[crosshairs]

I think Obama understands everything he is doing, because by design he has set out from the beginning to destroy this country in every way possible.

[crosshairs]

Kinnison LOL

[econjack]

:>)

[timestax]

bttt