The Truth About High Tax Rates
Posted May 03, 2021
High tax rates do not redistribute incomes. They redistribute taxpayers.
From stocks and factories, foundries and laboratories, to casinos and tax shelters and remote tax havens… from Silicon Valley and San Francisco, to Austin, Salt Lake City, Moscow, and Idaho… from mines, smelters, infrastructure sites and urban offices, to Cayman Island beaches, the Isle of Man, and the Riviera… from trucks, tractors, earth movers, forklifts, and robotics to limousines, private jets, golf courses, and jewelry.
Tax hikes don’t raise money, they destroy enterprise.
These mantras of supply side economics never grow stale. About to learn this lesson big time is the Biden Administration.
It hopes to pay for all sorts of new welfare and infrastructure programs by raising the capital gains tax to 43.4% (plus inflation since purchase of the asset). Top tax rates on salaries will rise to 39.6%.
“Tax hikes for the rich” they call them — focused on earners of more than $400,000 (including the long-term inflated gain, actually a loss). But the costs will fall heavily on whoever holds shares in the market at the time it is enacted. And there is no chance in the world that such a tax hike will raise a dollar of net new revenues.
People imagine that the new rates are not confiscatory. But adjusted for the pervasive tax of inflation and of depreciating dollars and state level income taxes, a nominal tax anywhere near 40% gives most tax payers a higher incentive to avoid taxes than to take the risks and sacrifices needed to earn new income.
Avoiding taxes merely means moving or hiring a good lawyer. Earning incremental income means hard work, ingenuity, and risk.
Today, high tax rates are redistributing entrepreneurs, investors, and engineers in U-Hauls and private jets, Tesla’s, and Toyota Priuses from New York and California to Utah, Idaho, Texas, and Florida.
US tax hikes and xenophobic politicians are ending the Chinese diaspora of talent and rendering the Communist regime more receptive to capital and industry than ostensibly capitalist America.
Tomorrow, madly climbing the Laffer Curve to points well above the tree-lines of enterprise, where economies can scarcely breathe, the gouge-governments of America will be redistributing taxpayers to Asia and Eastern Europe, Latin America, and Israel.
In tomorrow’s Prophecy, Nathan Lewis explains these facts of life with characteristic pith and style.
Editor, Gilder's Daily Prophecy