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Reducing tax rates on the rich actually increases tax collections from the rich. If this is so, how can both exist simultaneously? Simply stated, incentives make a difference. At lower tax rates, the rich work harder because they get to keep more of their earned income.
To support this argument, one needs only to refer to a recent study done by the Wall Street Journal using IRS statistics.
Remember the huge Bush tax cuts for the rich? Looking back to that experience, here is what happened to tax collections from 2003, when the tax cuts were initiated, to 2008, the last year of the Bush administration: For the highest income earners, their tax payments went from $35 billion to $84 billion, a 140 percent increase.
For all "rich" people earning $200,000 or more per year, their taxes payments went from $313 billion to $537 billion, a 72 percent increase.
So, who is better off -- the rich or the recipients of the tax collector's bonanza?
By increasing taxes on the rich as planned, my bet is tax revenues will fall and the rich will be "poorer" because they won't work as hard and earn as much. But the people who envy those "rich" will suffer much more.
Thomas E. Nugent
Hilton Head Island
