To "prove" their point, liberals point to analyses by economists working at liberal think tanks of the preferential rates on capital gains and dividends..the money the so-called "1%" makes off the backs of the other "99%'s" labor. The general conclusion of those analyses is that raising the top tax rate above the current 23.8% will bring in more tax revenue, but raising the top tax rate above 30% and tax revenues go down as the 1% reduce their capital gains realizations.
Unfortunately, what those analyses exclude, according to the Chief Economist at the Tax Foundation, Will McBride, are the behavioral effects associated with increasing those preferential rates. U.S. Treasury data demonstrate an inverse relationship between the top tax rate and revenue--a negative correlation of 0.39--which means that higher tax rates bring in less revenue.
Consider the 26-year period of 1954-1980:
- The highest tax rates, on average, 29.13%.
- The lowest tax revenue, on average, 0.38% of gross domestic product (GDP).
Then consider the 9-year period of 1987 to 1996 experienced the second highest top tax rates.
- The second highest tax rates, on average, 28.66%.
- The second lowest lowest tax revenue, on average, 0.6%.
Contrast those two periods of high tax rates with the 5-year period 1981-1986: experienced a relatively low top tax rate.
- A relatively low top tax rate, on average, 20%
- Average tax revenue was higher at 0.62% of GDP.
Lastly, consider the 16-year period 1997-2013:
- The lowest top tax rate, on average, 18.26%.
- The highest tax revenue, on average, 0.77% of GDP.
Despite the facts of economic reality, liberals continue to tout the "hopium and changium" that a higher revenue maximizing tax rate will increase revenues to the federal government.
Why should anyone be surprised? Ideology always trumps facts. With their lemmings in the mainstream media trumpet their false belief and depict the 1% as Robber Barons perpetrating evil upon the other 99%. And, it works!
But, to The Motley Monk, it's nothing more than the classic "class warfare" argument, meant to pit the "haves" against the "have not's." What a wonderful way to forge "e pluribus unum."
Let the discussion begin...
To read Will McBride's analysis, click on the following link:
"To Raise the Capital Gains Tax Rate Is to Not Raise Capital Gains Taxes."