A Christian, Anglican, Lawyer, Father and Prison Minister, On Church and Life
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Of course, Sweeden has a tax rate that is 50% of GDP. Are we to assume that Hauser’s “Law” — I suggest it’s only a theory and not a well tested one — applies only to the United States?
I’m for doing away with the abominable income tax…but this makes me wonder…who made up the difference?
Dear Mr. Delmore,
What has happened is that those people with huge amounts of assets pay accountant large amount of money to figure out where to put their assets so as not to pay huge amount of taxes. It is worth it to pay accountants (and often lawyers) ten of thousands of dollars to save hundreds of thousands of dollars in taxes. When the tax rates come down, their money will go into things that they may have to pay SOME amount of tax on. When rates go up, it becomes more important to shield the assets (money) from the taxman than to try and make it grow especially if you take all the risk and the government gets all the benefit. End result; lower taxes does not equal lower revenue because money will go into things like new business that make more money and often create new jobs. It sometimes takes a few years for this to happen but every April 15th everyone thinks about what they need to do to make things better for next year.
Actually, the graph does not show that “you can’t soak the rich.“ Of course you can; we did (or at least tried to) until the early 1980’s.
What the graph does show is that you can make a lot of changes to the top marginal rate without doing a whole lot to overall tax revenue as a percentage of GDP. But there are so many variables left unconstrained (how many taxpayers qualified for each of those top rates? How much of the tax burden did they really bear? What happened to the rest of the tax code at the same time?) that it’s hard to say much more than that from that one graph.
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