Posted on 08/08/2009 2:12:23 PM PDT by reaganaut1
With the expiration of the Bush tax cuts and the implementation of a proposed health care surtax, in 2011 the top federal individual income tax rate will rise to more than 46% and over 50% for those living in many states. This sharp increase in tax rates can be expected to reduce the size of the tax base and may raise substantially less revenue than the casual observer might think—perhaps only 60 cents on the dollar.
In Tax Foundation Fiscal Fact No. 182, "The Economic Cost of High Tax Rates," Senior Fellow Robert Carroll explains that for every 1% decrease in the after-tax reward from earning income—what taxpayers get to keep after paying taxes—taxpayers reduce their reported income by about 0.4%. The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/24935.html.
"Obama's plan to raise the top tax rate from 35% to 39%, combined with the health care surtax, would mean top-earning households are keeping 17% less of their income after paying taxes," Carroll said. "Those earners can be expected to reduce their reported incomes by nearly 7%, resulting in a smaller tax base and less revenue for the government."
The high tax rates will also disproportionately harm small businesses and discourage entrepreneurialism. Carroll notes that roughly one-third of all business taxes are paid by owners of so-called "flow-through" businesses—sole proprietorships, partnerships and S-corporations—when they file individual income tax returns. About one-fourth of taxpayers hit by the higher tax rates derive at least 50 percent of their income from a flow-through business. Also, a substantial share of the new revenue—40 percent for the increase in the top two tax rates and 29 percent for the high-income surtax—can be attributed directly to the income reported for flow-through businesses by their owners.
(Excerpt) Read more at taxfoundation.org ...
Me? I’m gonna reduce my income bit by bit, tax increase by tax increase and take the time off - something that is not taxed, yet.
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I’d still like to know why “the rich” have to pay the medical bills for freeloaders and non-Americans. That just don’t make sense to me. Of course, I don’t do drugs and I’m not a nazi union thug.
Many people are already doing that. Starve those beasts. Barter, make deals for cash payments, there are so many ways to get around it. Until the Marxist was elected I don’t think people really realized that you avoid paying a lot of taxes. We hired a new employee yesterday and he claimed 10. He was advised that he may owe at the end of the year. He said he knew he might, but if he did, he had no intention of paying them sh*t.
Maybe it’s time we forget about taxing income and tax consumption instead? The tax base from a consumption tax is about twice that of the the tax base from an income tax....
Who cares? Just keep the money printing presses running. That is the way to solve the mess we are in. Print, print and print and go for more debt, debt and even more debt. That is the new age accounting system.
Gardner was wrong, the Laffer Curve is real. Just look at tax rates verus tax revenue for the past 35 years.
The psychological tipping point is around 40%. Above that and people start working harder to hide their money rather than earn it.
Wait until the government decides to tax 401K and IRA distributions at the highest tax rates.
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