Democrats want to go back to the bad old days of dozens of income tax rates, with the highest being 49% (though some are suggesting 70%), figuring they'll collect billions more in tax revenues. However, history shows the won't collect all that much more and in fact will collect even less than they do now.
All this will do is narrow the tax base even farther than it already has been, placing an even greater burden on upper income Americans. The so-called Fairness in Taxation Act will be anything but. The Democrats seem to worry the rich aren't paying their “fair” share. Never mind that they already pay a very large majority of income taxes. Never mind that just under half of American wage earners already pay no income tax at all. How is that not fair? Oh, yeah, I forgot. To tax-and-spend Democrats, a fair share is always defined as “more than they pay now.”
The intelligentsia of the Democratic Party is growing increasingly enthusiastic about raising the highest federal income tax rates to 70% or more. Former Labor Secretary Robert Reich took the lead in February, proposing on his blog "a 70 percent marginal tax rate on the rich." After all, he noted, "between the late 1940s and 1980 America's highest marginal rate averaged above 70 percent. Under Republican President Dwight Eisenhower it was 91 percent. Not until the 1980s did Ronald Reagan slash it to 28 percent."
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All this nostalgia about the good old days of 70% tax rates makes it sound as though only the highest incomes would face higher tax rates. In reality, there were a dozen tax rates between 48% and 70% during the 1970s. Moreover—and this is what Mr. Reich and his friends always fail to mention—the individual income tax actually brought in less revenue when the highest tax rate was 70% to 91% than it did when the highest tax rate was 28%.
They've chosen to ignore the effects such tax rates will have on the economy, that being that it will kill off any recovery there may have been as investment capital flees the country, meaning businesses won't be able to expand and jobs these businesses might have been able to provide won't be created. All they have to do to see what the effects of a return to those draconian tax rates is look at what the US economy was like back in the 1970's.
For those of you who have forgotten (or weren't born yet), the economy sucked. Unemployment skyrocketed. Inflation reached staggering rates, as did interest rates. Now these know-nothings want to take our already shaky economy and create an even bigger recession when they kill off any incentive to invest, to expand, to do better. Haven't they learned that if you punish people for succeeding all they will get is failure and a shrinking economy, along with plummeting tax revenues? Obviously not.
Need another example? How about the UK during the same time? They greatly increased income taxes across the board, with the top tax rate reaching 98%. As soon as the government imposed those taxes, the British economy collapsed as wealth and investment capital fled for more friendly environments. It wasn't until the 80's when Maggie Thatcher became Prime Minister and drove Parliament to end such insanity that the British economy recovered.
Yet here we have another bunch of economic morons within Congress who want to do the same thing, figuring it will have little if any effect on the economy. They have chosen to ignore history, and are thereby doomed to repeat it. Unfortunately it will be We The People who will pay the price for such stupidity and arrogance.