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Even amoebas learn by trial and error, but some economists and politicians do not. The Obama administration's budget projections claim that raising taxes on the top 2% of taxpayers, those individuals earning more than $200,000 and couples earning $250,000 or more, will increase revenues to the U.S. Treasury. The empirical evidence suggests otherwise. None of the personal income tax or capital gains tax increases enacted in the post-World War II period has raised the projected tax revenues.
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>Over the past six decades, tax revenues as a percentage of GDP have averaged just under 19% regardless of the top marginal personal income tax rate. The top marginal rate has been as high as 92% (1952-53) and as low as 28% (1988-90). This observation was first reported in an op-ed I wrote for this newspaper in March 1993. A wit later dubbed this "Hauser's Law."
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>Over this period there have been more than 30 major changes in the tax code including personal income tax rates, corporate tax rates, capital gains taxes, dividend taxes, investment tax credits, depreciation schedules, Social Security taxes, and the number of tax brackets among others. Yet during this period, federal government tax collections as a share of GDP have moved within a narrow band of just under 19% of GDP.>
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http://online.wsj.com/article/SB10001424052748703514904575602943209741952.html?KEYWORDS=bush+tax+rates+gdpThat may be true. The answer, though, surely does not lie in tax cuts to the rich. That increases the deficit rather than reducing it. Trickle-down economics is the canard that just won't go away.
Just to keep this factual, Obama has not proposed raising taxes on the top 2%. His position was to agree with the Republican proposal of extending the "temporary" tax cuts of 10 years ago for all but the top 2%. They would go back to the tax rate they had before. Yes, he caved -- this guy needs a serious LBJ injection -- but he did not propose a tax increase.
CLARIFICATION: The Republican proposal was to extend the Bush tax cut for everyone. Obama wanted to exempt the top 2%.
