What happens when you “tax the rich”, like Obama wants to do?
The UK Telegraph explains what actually happens when you tax the rich.
Excerpt:
Almost two-thirds of the country’s million-pound earners disappeared from Britain after the introduction of the 50p top rate of tax, figures have disclosed.
In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs.
This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election.
The figures have been seized upon by the Conservatives to claim that increasing the highest rate of tax actually led to a loss in revenues for the Government.
It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes.
[…]Last night, Harriet Baldwin, the Conservative MP who uncovered the latest figures, said: “Labour’s ideological tax hike led to a tax cull of millionaires.
Far from raising funds, it actually cost the UK £7 billion in lost tax revenue.
Similarly in France, with their Socialist leader’s 75% top tax rate: (worse than Obama!)
A flood of top-end properties are hitting the market as businessmen seek to leave France before stiff tax hikes hit, real estate agents and financial advisors say.
“It’s nearly a general panic. Some 400 to 500 residences worth more than one million euros ($1.3 million) have come onto the Paris market,” said managers at Daniel Feau, a real-estate broker that specialises in high-end property.
[…]While the Socialists’ plan to raise the tax rate to 75 percent on income above 1.0 million euros per year has generated the most headlines, a sharp increase in taxes on capital gains from the sales of stock and company stakes is pushing most people to leave, according Didier Bugeon, head of the wealth manager Equance.
French entrepreneurs have complained vociferously against a proposal in the Socialist’s 2013 budget to increase the capital gains tax on sales of company stakes, which they argue will kill the market for innovative start-up companies in France.
Entrepreneurs in the high-tech sector in particular often invest their own money and take low salaries in the hope they can later sell the company for a large sum.
They say a stiff increase in capital gains tax would remove incentives to do this in France. They also argue that capital has already been taxed several times in the making.
Rich people are not stupid. If you change the rules of the game, they make adjustments. Why on Earth would anyone keep working as hard as before when the government takes more of what they earn and gives it away to left-wing special interest groups? You either stop working as hard as before or you leave the country entirely. Rich people are not our slaves.
We let people keep the profits they make so that they will risk their capital and try to invent new things and create jobs. If we don’t let them keep their profits, then they will not save, invest, take risks and create jobs. People who depend on “Obamaphones” don’t create jobs. Only rich people do. And the more you tax the rich, the fewer jobs you will have. That’s the way the world really works. Taking money from those who work and giving it to those who don’t sounds “nice”, but it doesn’t actually help the poor. What helps the poor is having a job, not giving them free stuff paid for by others who work. You should not be able to make more money by not working than by working in this country, either.
Remember what happened when Reagan and Bush cut taxes? Massive drops in unemployment and higher revenues from taxes.
Consider this article by the Cato Institute, a libertarian think tank, which discusses how the Reagan tax cuts affected the unemployment rate.
Excerpt:
In 1980, President Carter and his supporters in the Congress and news media asked, “how can we afford” presidential candidate Ronald Reagan’s proposed tax cuts?
Mr. Reagan’s critics claimed the tax cuts would lead to more inflation and higher interest rates, while Mr. Reagan said tax cuts would lead to more economic growth and higher living standards. What happened? Inflation fell from 12.5 percent in 1980 to 3.9 percent in 1984, interest rates fell, and economic growth went from minus 0.2 percent in 1980 to plus 7.3 percent in 1984, and Mr. Reagan was re-elected in a landslide.
[…]Despite the fact that federal revenues have varied little (as a percentage of GDP) over the last 40 years, there has been an enormous variation in top tax rates. When Ronald Reagan took office, the top individual tax rate was 70 percent and by 1986 it was down to only 28 percent. All Americans received at least a 30 percent tax rate cut; yet federal tax revenues as a percent of GDP were almost unchanged during the Reagan presidency (from 18.9 percent in 1980 to 18.1 percent in 1988).
What did change, however, was the rate of economic growth, which was more than 50 percent higher for the seven years after the Reagan tax cuts compared with the previous seven years. This increase in economic growth, plus some reductions in tax credits and deductions, almost entirely offset the effect of the rate reductions. Rapid economic growth, unlike government spending programs, proved to be the most effective way to reduce unemployment and poverty, and create opportunity for the disadvantaged.
President Bush signed the first wave of tax cuts in 2001, cutting rates and providing tax relief for families by, for example, doubling of the child tax credit to $1,000.
At Congress’ insistence, the tax relief was initially phased in over many years, so the economy continued to lose jobs. In 2003, realizing its error, Congress made the earlier tax relief effective immediately. Congress also lowered tax rates on capital gains and dividends to encourage business investment, which had been lagging.
It was the then that the economy turned around. Within months of enactment, job growth shot up, eventually creating 8.1 million jobs through 2007. Tax revenues also increased after the Bush tax cuts, due to economic growth.
In 2003, capital gains tax rates were reduced. Rather than expand by 36% as the Congressional Budget Office projected before the tax cut, capital gains revenues more than doubled to $103 billion.
The CBO incorrectly calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion. Revenues for 2006 came in $47 billion above the pre-tax cut baseline.
Here’s what else happened after the 2003 tax cuts lowered the rates on income, capital gains and dividend taxes:
GDP grew at an annual rate of just 1.7% in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1%.
The S&P 500 dropped 18% in the six quarters before the 2003 tax cuts but increased by 32% over the next six quarters.
The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.
The timing of the lower tax rates coincides almost exactly with the stark acceleration in the economy. Nor was this experience unique. The famous Clinton economic boom began when Congress passed legislation cutting spending and cutting the capital gains tax rate.
Those are the facts. That’s not what you hear in the media, but they are the facts.
Melissa Bruninga-Matteau, a medieval-history Ph.D. and adjunct professor who gets food stamps: “I’ve been able to make enough to live on. Until now.”
“I am not a welfare queen,” says Melissa Bruninga-Matteau.
That’s how she feels compelled to start a conversation about how she, a white woman with a Ph.D. in medieval history and an adjunct professor, came to rely on food stamps and Medicaid. Ms. Bruninga-Matteau, a 43-year-old single mother who teaches two humanities courses at Yavapai College, in Prescott, Ariz., says the stereotype of the people receiving such aid does not reflect reality. Recipients include growing numbers of people like her, the highly educated, whose advanced degrees have not insulated them from financial hardship.
“I find it horrifying that someone who stands in front of college classes and teaches is on welfare,” she says.
Ms. Bruninga-Matteau grew up in an upper-middle class family in Montana that valued hard work and saw educational achievement as the pathway to a successful career and a prosperous life. She entered graduate school at the University of California at Irvine in 2002, idealistic about landing a tenure-track job in her field. She never imagined that she’d end up trying to eke out a living, teaching college for poverty wages, with no benefits or job security.
Ms. Bruninga-Matteau always wanted to teach. She started working as an adjunct in graduate school. This semester she is working 20 hours each week, prepping, teaching, advising, and grading papers for two courses at Yavapai, a community college with campuses in Chino Valley, Clarkdale, Prescott, Prescott Valley, and Sedona. Her take-home pay is $900 a month, of which $750 goes to rent. Each week, she spends $40 on gas to get her to the campus; she lives 43 miles away, where housing is cheaper.
Ms. Bruninga-Matteau does not blame Yavapai College for her situation but rather the “systematic defunding of higher education.” In Arizona last year, Gov. Jan Brewer, a Republican, signed a budget that cut the state’s allocation to Yavapai’s operating budget from $4.3-million to $900,000, which represented a 7.6 percent reduction in the college’s operating budget. The cut led to an 18,000-hour reduction in the use of part-time faculty like Ms. Bruninga-Matteau.
“The media gives us this image that people who are on public assistance are dropouts, on drugs or alcohol, and are irresponsible,” she says. “I’m not irresponsible. I’m highly educated. I have a whole lot of skills besides knowing about medieval history, and I’ve had other jobs. I’ve never made a lot of money, but I’ve been able to make enough to live on. Until now.”
She’s irresponsible, because she expects the people who choose to study rather difficult and unpleasant subjects like nursing and computer science and economics to pay for her lifestyle through taxation and “higher education funding”. I do think it’s important to point out that the main driver of higher tuition is increasing government funding of education, and that this increasing funding of higher education is nothing but corporate welfare.
Excerpt:
The most obvious way that colleges might capture federal student aid is by raising tuition. Research to date has been inconclusive, but Stephanie Riegg Cellini of George Washington University and Claudia Goldin of Harvard have provided compelling new analysis. Cellini and Goldin looked at for-profit colleges, utilizing the key distinction that only some for-profit schools are eligible for federal aid. Riegg and Goldin find that that aid-eligible institutions “charge much higher tuition … across all states, samples, and specifications,” even when controlling for the content and quality of courses. The 75 percent difference in tuition between aid-eligible and ineligible for-profit colleges — an amount comparable to average per-student federal assistance — suggests that “institutions may indeed raise tuition to capture the maximum grant aid available.”
Here are some of the comments that I posted in a Facebook discussion about the CHE story:
I know that some may disagree with me, but this is why people need to focus on STEM fields and stay away from artsy stuff and Ph.Ds in general. We are in a recession. Trade school and STEM degrees only until things improve.
Also, no single motherhood by choice. Get married before you have children, and make sure you vet the husband carefully for his ability to protect, provide, commit and lead on moral and spiritual issues. This woman is not a victim. She chose her life, and the rest of us are paying for it. Nice tattoos by the way – that will really help when she’s looking for a job.
I am actually better at English than computer science, but I find myself with a BS and MS in computer science. We don’t get to do what we like. We do what we have to in order to be effective as Christians. According to the Bible, men have an obligation to not engage in premarital sex, and to marry before having children, and to provide for their families, or they have denied the faith. I would like to have studied English, but the Bible says no way.
I have no problem with people who can make a career out of the arts, like a Robert George or a William Lane Craig. But you can’t just go crazy. And I think men have a lot less freedom than women to choose their major, we have the obligation to be providers and we have to be selected by women based on whether we can fulfill that role (among other roles).
Women have more freedom because they are not saddled with the provider role like men are. However, I think that the times now are different than before. There is more discrimination against conservatives on campus in non-STEM fields and fewer non-STEM jobs in a competitive global economy. The safest fields are things like petroleum engineering, software engineering, etc.
If [people who major in the humanities] can make a living and support a family without relying on government-controlled redistribution of wealth, then I salute and encourage you. If you rely on the government, know that this money is being taken away from those who are doing things they don’t like at all in order to be independent and self-reliant. It is never good to be dependent on government. That money comes from people like me.
In response to an artsy challenger:
I am happy to be scorned by those who make poor choices so long as I can have my money back from them so that I can pursue my dreams. I didn’t see any of these artsy people in the lab at 4 AM completing their operating system class assignments, nor do I see them here working overtime on the weekend in the office. They can say anything and feel anything they want, and write plays and poetry all about their feelings, too. Just give me the money I earned back first. It’s not their money. They have no right to it.
One person asked why I was “always winter, never Christmas, and I replied:
It is Christmas for the Christians who I send books and DVDs to, as well as for the Christian scholars I support, and the Christian conferences, debates and lectures I underwrite across the world. Unfortunately, every dollar taken from me is a dollar less for that Ph.D tuition of a Christian debater, a dollar less for the flight of that Christian apologetics speaker, a dollar less for that textbook for that Christian biology student, and a dollar less for the flowers being sent to that post-abortive woman who I counseled who is now in law school. I have a need for the money I earn, and when it’s sent to Planned Parenthood to pay for abortions by the government, my plan to serve God suffers. And finally, should I ever get married, I would like my wife to have the option of staying home with the children and even homeschooling them. That costs money. Somehow, I feel that given the choice between my homeschooling wife and the public school unions, the government will choose to give my money to the unions. Just a hunch.
I think that people should go into the humanities when they are serious about making a career of it and can get the highest grades. But if they are coasting and only getting Bs and Cs and not paying attention in class, then drop out and go to trade school. Don’t complain later when you can’t find a job. STEM careers pay the most.
WINTERY KNIGHT 