Taxes = prosperity


I found this nifty chart on DailyKos, along with an article about the idiot who wants to cut taxes on the rich again. I realize it's a little hard to read the exact dates, but here's the overall point:

High taxes on the wealthy, generally speaking, correspond to periods of economic prosperity. Low taxes on the rich, generally speaking, correspond to bad economic periods.

Gee, could there be a connection here?


Sure there could. But the real question is - what is that connection, and why?

Correlation is not causation, we all learned at college (actually I can't remember learning it there; poetic license).

So is it that a good economy promotes redistribution of wealth (which is what higher taxes is really about)?

Or is it that higher taxes somehow creates a good economy, which I am sure is your interpretation.

I don't know the answer but I think that, at minimum, you need to look at the total tax take. What was happening during the same period with capital gains tax, social security contributions, sales taxes, property taxes, inheritance tax? We need the whole picture.

Oh, and also why not do some research globally? Are low-tax places like Dubai and Hong Kong, more economically successful than high-tax places like Holland and Finland?

Posted by TonyW on Mar. 17, 2011 @ 12:16 pm

Other, less biased publications than the Daily Kos, have explained that while this "idiot" proposes lowering the tax rate, he is also suggesting cutting many of the deductions such as mortgage interest and the like. So net/net, it might not decrease revenue all that much.

Congress and California should start discussing a flat tax--without all the various deductions, credits, write-offs, etc.--to simplify the system. High earners would still pay more (If there is a 20% flat tax rate, a guy making $1,000,000 would pay $200K, a guy making $100,000 wold pay $20K.) It would make budget projecting a lot less volatile. One of the reasons California's budget is a mess every year is because it's so dependent on income taxes on high earners. When those high earners make less in a down economy, they pay less income tax and California has less revenue. A flat tax would spread out the tax base more.

Jerry Brown used to be a flat tax guy.

I'm sure this suggestion will be incredibly popular with the Bay Guardian crowd.

Posted by The Commish on Mar. 17, 2011 @ 1:23 pm

yes, they got rid of "all those loopholes" with reagan as they hiked taxes on lower incomes (regressive social security tax that's been used to finance tax cuts and wars) and dropped them on the rich. thing is that rich people have lobbyists and pet congress-critters who eventually replace the closed loopholes with new ones.

and flat tax would have to be pretty damn high to replace all of the lost revenue, meaning again that lower income folks will again pay while the rich escape paying their fair share.

tax the rich. spend on the middle and poor. repeat as necessary.

Posted by alex on Mar. 17, 2011 @ 1:47 pm

There might be other variables involved there.

"Taxing the rich" is a lot like the "power of prayer" on the religious right. The answer to every question.

On some Pacific Islands, the natives after WW2 I built a landing strips and lit some fire in hopes of having the Americans come back and give them things, it worked as far as I know.

Posted by matlock on Mar. 18, 2011 @ 4:14 am