History and current events prove that raising tax rates are counter productive.
If only economics and history were mutually exclusive you would realize the fallacy of your argument. Yes, JFK lowered taxes to spur economic growth. He lowered them from over 90% to about 70%.
They were later raised to offset the deficits that occurred as a result of that act. Reagan did the same thing during his administration. Lowered taxes and then raised them to offset the massive borrowing caused by the deficits of the budgets he negotiated with congress.
The only pony hobbling that has occurred is the belief that tax cuts create jobs. There is no historical or empirical evidence that shows that to be the case. In fact just the opposite. History has shown the US economy has had higher levels of productivity when the marginal tax rate was above 50%.
Sure the inteded target of this item is California, but the examples are national. Gary Jason: Atlas may not shrug, just move away
Published: OC Register: Dec. 5, 2012 Updated: 4:40 p.m.
For glimpse of the aftermath of California’s Prop. 30, look to what happened in Britain, France.
Gov. Jerry Brown and the public employee unions that back him are celebrating the passage of Proposition 30. Californians retroactively raised income taxes on the rich, who now have to pay confiscatory (indeed, predatory) rates of up to 13.3 percent on their incomes, on top of what might soon be a 40 percent federal rate being pushed by the re-elected President Barack Obama.
But Brown and his Myrmidons best go light on that champagne. They anticipate a great gusher of revenue. In fact, they might want to look at the recent experience of other countries in this regard – it might temper their enthusiasm over their big score.
Consider Britain. In the 2009-10 tax year, more than 16,000 Brits reported an annual income greater than 1 million pounds (about $1.6 million). The Labor prime minister, Gordon Brown, jacked up the tax rate on these misanthropic millionaires to 50 percent, with few deductions allowed.
Well, the following year the numbers of those millionaires had dropped to a mere 6,000 – a decline of nearly two-thirds. Apparently most of the wealthy either found ways to mitigate their income, or simply moved abroad.
Who could have imagined that people with brains enough to earn a million pounds a year in Britain's stubbornly statist economy would devise ways to escape Gordon Brown's onerous taxes?
The Conservative Party Chancellor of Revenue and Customs subsequently announced that the rate will be dropped to 45 percent, and since then the number of British self-reported millionaires bounced back to 10,000. That is progress, though it is still well below what it was before the steep taxes were imposed. Moreover, the Gordon Brown tax hike actually cost the British government about 7 billion pounds ($11.2 billion) in tax revenue.
Now, perhaps the correlation between Britain's tax increases and the flight of her wealthy is pure coincidence. To help rule this out, let's look at Britain's neighbor.
France, even more prone than Britain to statist over-reaching, this year elected a socialist prime minister, who promptly got a 75 percent income tax (and a 60 percent capital-gains tax) passed on incomes over 1 million euros (about $1.3 million). The results have been equally prompt.
In the eight months since the tax increases were announced, there has been a 10 percent increase in the inventory of Parisian properties for sale, especially at the high end. About 400 Paris homes worth more than 1 million euros have come on the market.
Many of the wealthy French are moving to Brussels, Belgium, which has traditionally been a haven for French fleeing high taxes, as is Switzerland.
All of this is creating a great buying opportunity for wealthy foreigners, especially Chinese, Russian, Swiss and Middle Eastern ones.
In sum, what Gov. Brown and the voters who gave him his tax victory are likely to discover is that, after a large number of wealthy flee to other states – to join the hundreds of thousands of middle-class California refugees who fled earlier because of the high unemployment rate, the lousy business climate and challenged public schools – revenue will fall far short of projections.
It appears that Atlas may not shrug, but will simply move.