Thomas Sowell‘s latest column posted at the Washington Examiner questions President Obama’s emphasis on taxing “millionaires and billionaires.”
President Obama’s constant talk about “millionaires and billionaires” needing to pay higher taxes would be a bad joke, if the consequences were not so serious.
Even if the income tax rate were raised to 100 percent on millionaires and billionaires, it would still not cover the trillions of dollars the government is spending.
More fundamentally, tax rates — whatever they are — are just words on paper. Only the hard cash that comes in can cover government spending. History has shown repeatedly, under administrations of both political parties, that there is no automatic correlation between tax rates and tax revenues.
When the tax rate on the highest incomes was 73 percent in 1921, that brought in less tax revenue than after the tax rate was cut to 24 percent in 1925.
Why? Because high tax rates that people don’t actually pay do not bring in as much hard cash as lower tax rates that they do pay. That’s not rocket science.
Then and now, people with the highest incomes have had the greatest flexibility as to where they will put their money. Buying tax-exempt bonds is just one of the many ways that “millionaires and billionaires” avoid paying hard cash to the government, no matter how high the tax rates go. Most working people don’t have the same options. Their taxes have been taken out of their paychecks before they get them.
