Monday, August 02, 2010

Economics Trumps Taxing the Wealthy

Here is one more reason that the study of economics should be required of all persons elected to Congress. Typically, Democrats, too many Republicans and all liberals think of the tax and spend system as static. They think that if we have a deficit, we need to raise tax rates to close the gap.

No. We may need to raise tax revenues, but raising tax rates is often counterproductive. According to Economist Arthur Laffer in the Wall Street Journal:

Anyone who is familiar with the historical data available from the IRS knows full well that raising income tax rates on the top 1% of income earners will most likely reduce the direct tax receipts from the now higher taxed income—even without considering the secondary tax revenue effects, all of which will be negative. And who on Earth wants higher tax rates on anyone if it means larger deficits?
The answer to his question is, soak-the-rich Democrats. The politics of envy. The folks that think it is government's job to redistribute the wealth from those who earn it to those who don't.

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