Tax the rich! Sounds pretty simple, doesn't it. Well, it's not: people are smarter than planners.
Neil Reynolds at the Globe and Mail writes: A millionaires’ tax is all the rage, but it’s another thing to collect
One of the champions of a “millionaire’s tax” has been Chicago economist Austan Goolsbee, who chaired Barack Obama’s Council of Economic Advisers for a year until he stepped down in August. Yet, back in 1999, Mr. Goolsbee concluded (in a research paper) that “higher marginal tax rates led [in the 1990s] to a significant decline in taxable income.” In his study of America’s richest million taxpayers, he found that “a small number of executives,” by themselves, accounted for 20 per cent of the decline.
AM: Tax revenue = tax rate X tax base
The catch is this: when you raise the rate, you shrink the base. Higher rates kill economic activity and encourage people to find new ways to avoid paying.
