I’ve already shared a bunch of data and evidence on the importance of low tax rates.
A review of the academic evidence by the Tax Foundation found overwhelming support for the notion that lower tax rates are good for growth.
An economist from Cornell found lower tax rates boost GDP.
Other economists found lower tax rates boost job creation, savings, and output.
Even economists at the Paris-based OECD have determined that high tax rates undermine economic performance.
And it’s become apparent, with even the New York Times taking notice, that high tax rates drive away high-achieving people.
We’re going to augment this list with some additional evidence.
In a study published by a German think tank, three economists from the University of Copenhagen in Denmark look at the impact of high marginal tax rates on Danish economic performance.
Here’s what they set out to measure.
…taxation distorts the functioning of the market economy by creating a wedge between the private return and the social return to a reallocation of resources, leaving socially desirable opportunities unexploited as a result. …This paper studies the impact of taxation on the mobility and allocation of labor, and quantifies the efficiency loss from misallocation of labor caused by taxation. …labor mobility responses are fundamentally different from the hours-of-work responses of the basic labor supply model… Our analysis builds on a standard search theoretic framework… We incorporate non-linear taxation into this setting and estimate the structural parameters of the model using employer-employee register based data for the full Danish population of workers and workplaces for the years 2004-2006. The estimated model is then used to examine the impact of different changes in the tax system, thereby characterizing the distortionary effects of taxation on the allocation of labor.
They produced several sets of results, including a look at the additional growth and output generated by moving to a system of lump-sum taxation (which presumably eliminates all disincentive effects).
But even when they looked at more modest reforms, such as a flat tax with a relatively high rate, they found the Danish economy would reap significant benefits.
…it is possible to reap a very large part of the potential efficiency gain by going half the wayand replace the current taxation with a at tax rate of 30 percent on all income. This shift from a Scandinavian tax system with high marginal tax rates to a level of taxation in line with low-tax OECD countries such as the United States increases total income by 20 percent and yields an efficiency gain measured in proportion to initial income of 10 percent. …a transition from a Scandinavian system with high marginal taxes to a system along the lines of low-tax OECD countries such as the United States. This reduces the rate of non-employment by around 10 percentage points, increases aggregate income by almost 20 percent (relative to the Scandinavian income level), and gives an efficiency gain measured in proportion to income of 9.9 percent. Thus, almost 80 percent of the efficiency loss from marginal taxation (9.7% divided by 12.4%) would be eliminated by shifting from a Scandinavian tax system to the system of a low-tax OECD country according to these estimates.
The authors also confirmed that lower tax rates would generate revenue feedback. In other words, the Laffer Curve exists.
We may also use the reform experiment to compute the marginal excess burden of taxation as described above. When measured in proportion to the mechanical loss of tax revenue, we obtain an estimate of 87 percent. …this estimate also corresponds to the degree of self-financing of the tax cut. Thus, the increase in tax revenue from the behavioral response is 87 percent of the mechanical loss in tax revenue.
Too bad we can’t get the Joint Committee on Taxation in Washington to join the 21st Century. Those bureaucrats still base their work on the preposterous assumption that taxes have no impact on overall economic performance.
Since we just looked at a study of the growth generated by reducing very high tax rates, let’s now consider the opposite scenario. What happens if you take medium-level tax rates and raise them dramatically?
The Tax Foundation looks at precisely this issue. The group estimated the likely results if lawmakers adopted the class-warfare policies proposed by Thomas Piketty.
Piketty suggests higher taxes on the wealthiest among us. He calls for a global wealth tax, and he recommends establishing a top income tax rate of 80 percent, with a next-to-top income tax rate of 50 or 60 percent for the upper-middle class. …This study…provides quantitative estimates of what his proposed tax rates would mean for capital formation, jobs, the level of income, and government revenue. This study also estimates how Piketty’s proposed income tax rates would affect the distribution of income in the United States.
Piketty, of course, thinks that even confiscatory levels of taxation have no negative impact on economic performance.
Piketty claims people (or at least the upper-income people he would tax so heavily) are totally insensitive to marginal tax rates. In his world view, upper-income taxpayers will work and invest just as much as before even if dramatically higher taxes reduce their after-tax rewards to a fraction of what they were previously. …Piketty’s vision of the world strains credulity.
When the Tax Foundation crunched the numbers, though, its experts found that Piketty’s proposal would be devastating.
Under Piketty’s 55 and 80 percent tax brackets, people in the new, ultra-high tax brackets will work and invest less because they will be able to keep so little of the reward from the last hour of work and the last dollar of investment. …As the supplies of labor and capital in the production process decline, the economy’s output will also contract. Although it is only people with upper incomes who will directly pay the 55 and 80 percent tax rates, people throughout the economy will indirectly bear some of the tax burden. For example, the average person’s wages will be lower than otherwise because middle-income workers will have less equipment and software to enhance their productivity, and wages depend on productivity. Similarly, people throughout the economy will have fewer employment opportunities and will lose desirable goods and services, because businesses will grow more slowly and be less innovative.
The magnitude of the damage would depend on whether the higher tax rates also applied to dividends and capital gains. Here’s what the Tax Foundation estimated would happen to the economy if dividends and capital gains were not hit with Piketty-style tax rates.
These are some very dismal numbers.
But now look at the results if tax rates also are increased on dividends and capital gains. The dramatic increase in double taxation (dwarfing what Obama wanted) would have catastrophic consequences for overall investment (the “capital stock”). This would lead to a big loss in jobs and a dramatic reduction in overall economic output.
The Tax Foundation then measures the impact of these policies on the well-being of people in various income classes.
Needless to say, upper-income taxpayers suffer substantial losses. But the rest of us also suffer as well.
…the poor and middle class would also lose. They would suffer a large, but indirect, tax burden as a result of the smaller economy. Their after-tax incomes would fall over 3 percent if capital gains and dividends retain their current-law tax treatment and almost 17 percent if capital gains and dividends are taxed like ordinary income.
And since I’m sure Piketty and his crowd would want to subject capital gains and dividends to confiscatory tax rates, the 17 percent drop is a more realistic assessment of their economic agenda.
Though, to be fair, Piketty-style policies would make society more “equal.” But, as the Tax Foundation notes, some methods of achieving equality are very bad for lower-income people.
…a reasonable question to ask is whether a middle-income family is made better off if their income drops 3.2 percent while the income of a family in the top 1 percent drops 21.0 percent, or their income plummets 16.8 percent while the income of a family in the top 1 percent plummets 43.3 percent.
Of course, if Margaret Thatcher is correct, the left has no problem with this outcome.
But for those of us who care about better lives for ordinary people, this is confirmation that envy isn’t – or at least shouldn’t be – a basis for tax policy.
Sadly, that’s not the case. We’ve already seen the horrible impact of Hollande’s Piketty-style policies in France. And Obama said he would be perfectly content to impose higher tax rates even if the resulting economic damage is so severe that no additional revenue is collected.
[…] that focus on technical disagreements (for instance, how much do deadweight losses increase when tax rates go up?) and other policy fights that involve moral disagreements (for instance, should drugs be legalized […]
[…] Este pasaje sería divertido si no fuera tan deprimente. La economía demostró ser notablemente resistente teniendo en cuenta que el gobierno ordenó el cierre de gran parte de ella y luego creó todo tipo de desincentivos para volver a la normalidad en un momento en que la gente estaba aterrorizada por enfermarse En cuanto a la idea de que los impuestos de guerra de clases son la solución a la inflación, lea a Dan Mitchell aquí. […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] top rate of just 7 percent and we all know that the internal revenue code has since morphed into an anti-growth […]
[…] top rate of just 7 percent and we all know that the internal revenue code has since morphed into an anti-growth […]
[…] Higher tax rates on the rich will lead to lower middle-class wages. […]
[…] Higher tax rates on the rich will lead to lower middle-class wages. […]
[…] a soak-the-rich policy agenda, echoed by many other academics such as Emmanuel Saez and Gabriel Zucman, […]
[…] a soak-the-rich policy agenda, echoed by many other academics such as Emmanuel Saez and Gabriel Zucman, is fundamentally […]
[…] William Spriggs recommended class-warfare taxation. […]
[…] William Spriggs recommended class-warfare taxation. […]
[…] are many well-meaning people who support statist policies such as punitive taxation because they believe in the zero-sum fallacy, which is explained in this short video by Madsen […]
[…] are many well-meaning people who support statist policies such as punitive taxation because they believe in the zero-sum fallacy, which is explained in this short video by Madsen […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] common theme is “soak the rich.” Our friends on the left seem to think class-warfare taxation is politically popular, and it’s easy to understand their political calculus – win votes by […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] common theme is “soak the rich.” Our friends on the left seem to think class-warfare taxation is politically popular, and it’s easy to understand their political calculus – win votes by […]
[…] common theme is “soak the rich.” Our friends on the left seem to think class-warfare taxation is politically popular, and it’s easy to understand their political calculus – win […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] That scholarly research produced a very clear message: The overwhelming consensus was that higher tax rates were bad news for prosperity. […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] private ownership but government control), or the Bernie/AOC version (confiscatory taxation and pervasive […]
[…] the fascist version (nominal private ownership but government control), or the Bernie/AOC version (confiscatory taxation and pervasive […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax […]
[…] That scholarly research produced a very clear message: The overwhelming consensus was that higher tax rates were bad news for prosperity. […]
[…] That scholarly research produced a very clear message: The overwhelming consensus was that higher tax rates were bad news for prosperity. […]
[…] a wonk, I prefer serious criticisms of government that focus on excessive spending, punitive tax rates, and pointless red […]
[…] reduction, and the inadvisability of tax increases), I pontificated on the negative economic impact of class-warfare […]
[…] wealth taxation, poverty reduction, and the inadvisability of tax increases), I pontificated on the negative economic impact of class-warfare […]
[…] I’m an economist specializing in public finance, I get very upset about punitive tax policy and wasteful government […]
[…] risk of stating the obvious, this is not desirable since class-warfare taxes generally cause the most economic damageon a per-dollar-collected […]
[…] risk of stating the obvious, this is not desirable since class-warfare taxes generally cause the most economic damage on a per-dollar-collected […]
[…] argument against punitive tax policy is based on the fact that entrepreneurs, investors, business owners, and other successful people […]
[…] I also could have cited interesting results from Canada, Denmark, Hungary, Ireland, Italy, Portugal, Russia, France, and the United […]
[…] are right that a VAT doesn’t impose the same amount of damage, on a per-dollar-collected basis, as higher income tax rates. Or increases in double taxation […]
[…] repeatedly tried to explain that it is economically self-destructive to impose high – and discriminatory – taxes on income that is saved and […]
[…] those not familiar with economic jargon, “elasticity” is simply a term to describe how sensitive taxpayers are when there are changes in tax […]
[…] those not familiar with economic jargon, “elasticity” is simply a term to describe how sensitive taxpayers are when there are changes in tax […]
[…] those not familiar with economic jargon, “elasticity” is simply a term to describe how sensitive taxpayers are when there are changes in tax […]
[…] those not familiar with economic jargon, “elasticity” is simply a term to describe how sensitive taxpayers are when there are changes in tax […]
[…] those not familiar with economic jargon, “elasticity” is simply a term to describe how sensitive taxpayers are when there are changes in tax […]
[…] understand is that rich people won’t be the only ones hurt by this tax. Indeed, this is a very accurate criticism of almost all class-warfare […]
[…] to understand is that rich people won’t be the only ones hurt by this tax. Indeed, this is a very accurate criticism of almost all class-warfare […]
[…] Que es una de las razones por las que otras naciones han estado revocando este impuesto de guerra de clases. […]
[…] Which is one of the reasons why other nations have been repealing this class-warfare levy. […]
[…] Which is one of the reasons why other nations have been repealing this class-warfare levy. […]
[…] Which is one of the reasons why other nations have been repealing this class-warfare levy. […]
[…] Which is one of the reasons why other nations have been repealing this class-warfare levy. […]
[…] Which is one of the reasons why other nations have been repealing this class-warfare levy. […]
[…] Higher tax rates on the rich will lead to lower middle-class wages. […]
[…] Higher tax rates on the rich will lead to lower middle-class wages. […]
[…] reason why even left-leaning international bureaucracies agree that class-warfare taxes are so destructive. When you take a high tax rate and make it even higher, the damage grows […]
[…] But the fact that it’s not the only thing that matters doesn’t change the fact that it’s a very bad idea to increase the tax […]
[…] central argument against punitive taxation is that it leads to less economic […]
[…] porque me opongo a impuestos más altos. Pero también porque es muy probable que obtengamos el peor tipo de aumentos de impuestos, es decir, aumentos de lucha de clases en las tasas de impuestos o el […]
[…] part because I object to higher taxes. But also because it’s quite likely that we’ll get the worst kind of tax hikes – i.e., class-warfare increases in tax rates or work, saving, investment, and […]
[…] because I object to higher taxes. But also because it’s quite likely that we’ll get the worst kind of tax hikes – i.e., class-warfare increases in tax rates or work, saving, investment, and […]
[…] At the risk of understatement, that’s clear evidence that class-warfare policy has a negative effect. […]
[…] Punitive class-warfare taxes stifling investment and entrepreneurship. […]
[…] class-warfare taxes stifling investment and […]
[…] everyone else, the important lesson from this research is that high tax rates discourage productive behavior and drive away the people who create a lot of […]
[…] the Economic Recovery Tax Act of 1981) was good because the President and his team ignored the class-warfare crowd. They didn’t care whether all income groups got the same degree of tax relief. They […]
[…] Speaking of bad advice, let’s now contrast the sensible recommendations of Ms. O’Grady to the knee-jerk statism of the Organization for Economic Cooperation and Development. In a new report on Costa Rica’s tax system, the OECD urged ever-higher fiscal burdens for the country. Including destructive class warfare. […]
[…] I don’t particularly care whether there are tax cuts for rich people. But I care a lot about not having tax policies that penalize the behaviors (work, saving, investment, and entrepreneurship) that […]
[…] I don’t particularly care whether there are tax cuts for rich people. But I care a lot about not having tax policies that penalize the behaviors (work, saving, investment, and entrepreneurship) that […]
[…] like tax cuts because I’m an economist and we’ll get more growth if penalties on productive behavior are […]
[…] like tax cuts because I’m an economist and we’ll get more growth if penalties on productive behavior are […]
[…] like tax cuts because I’m an economist and we’ll get more growth if penalties on productive behavior are […]
[…] again, the authors are spot on. Taxes undermine incentives to be productive by driving a wedge between pre-tax income and post-tax consumption, so you have to look at levies […]
[…] again, the authors are spot on. Taxes undermine incentives to be productive by driving a wedge between pre-tax income and post-tax consumption, so you have to look at levies […]
[…] again, the authors are spot on. Taxes undermine incentives to be productive by driving a wedge between pre-tax income and post-tax consumption, so you have to look at levies […]
[…] again, the authors are spot on. Taxes undermine incentives to be productive by driving a wedge between pre-tax income and post-tax consumption, so you have to look at levies […]
[…] again, the authors are spot on. Taxes undermine incentives to be productive by driving a wedge between pre-tax income and post-tax consumption, so you have to look at levies […]
[…] again, the authors are spot on. Taxes undermine incentives to be productive by driving a wedge between pre-tax income and post-tax consumption, so you have to look at levies […]
[…] score. As you can see, our worst category is “government size.” In other words, we tax too much and spend too […]
[…] You don’t get higher wages by seizing ever-larger amounts of money from […]
[…] I was irked by the myopic fixation on income inequality, the support for class-warfare taxation, and the reflexive advocacy for more government spending, but messing around with the price system […]
[…] who is infamous for a theory rejected by the vast majority of economists and a tax plan that would cripple the economy and impose harsh misery on poor people, has now decided to pontificate on inequality and terrorism. Here’s some of what’s being […]
[…] who is infamous for a theory rejected by the vast majority of economists and a tax plan that would cripple the economy and impose harsh misery on poor people, has now decided to pontificate on inequality and terrorism. Here’s some of what’s […]
[…] a clever line is not the same as smart policy. Promising not to raise top tax rates to 90 percent or above is hardly a sign of moderation from […]
[…] a clever line is not the same as smart policy. Promising not to raise top tax rates to 90 percent or above is hardly a sign of moderation from […]
[…] varying ways, all these candidates have put forth relatively detailed proposals that address high tax rates, punitive double taxation, and distorting tax […]
[…] tax rates, which are what matters most for incentives, are even […]
[…] someone’s average tax rate (total tax payments/total income) requires some very big (and very bad) decisions on marginal tax rates (tax paid on the last dollar of income/last dollar of […]
[…] varying ways, all these candidate have put forth relatively detailed proposals that address high tax rates, punitive double taxation, and distorting tax […]
[…] we can at least hope that their minds will be opened to subsequent steps, such as understanding the economic impact of punitive tax rates, recognizing that high tax rates won’t necessarily collect more revenue, or realizing that […]
[…] we can at least hope that their minds will be opened to subsequent steps, such as understanding the economic impact of punitive tax rates, recognizing that high tax rates won’t necessarily collect more revenue, or realizing that […]
[…] not everyone is on board, The class-warfare crowd will never like a flat tax. And Washington insiders hate tax reform because it undermines their […]
[…] 2. It should go without saying (but I’ll say it anyhow) that ever-higher tax rates impose ever-higher levels of deadweight loss. […]
[…] 2. It should go without saying (but I’ll say it anyhow) that ever-higher tax rates impose ever-higher levels of deadweight loss. […]
[…] 2. It should go without saying (but I’ll say it anyhow) that ever-higher tax rates impose ever-higher levels of deadweight loss. […]
Increased taxation enriches the incompetent, corrupt and discriminatory cronies in the public sector unions. Ontario allocates at least 55% of its budget on public sector workers.
female teachers such as Mary Gowans uses her bloated salary to lure underaged male students to her home, and then deny the student’s accusations
in court. It should be mentioned that the feminist movement influenced the Judge’s decision to drop the case and enforce an innocent ruling on the male student’s accusations.
On the other hand, white female administrators such as Gordana Stefulic appoint lawyers such as Giselle Basanta and Micheal Lee to file SLAPP lawsuits in every direction of the
internet with an aim to censor the public about the conduct of Gordana Stefulic.
The most recent lawsuits which were filed by Gordana Stefulic were:
1) Ontario Principals’ Council et al v. Giglinx Global Incorporated – Justia
2) In Re Application of Ontario Principals’ Council, Gordana … – Justia
3) Ontario Principals’ Council, et al. v. Hall, et al. – Justia Dockets …
4) ORDER GRANTING-IN-PART EX PARTE APPLICATION FOR SUBPOENA OF TOPIX IN AID OF FOREIGN DEFAMATION SUIT by Judge Paul
SLAPPs aim to scare people from exercising First Amendment rights, like writing a review online, blogging on an issue of public interest, or speaking to the public about alleged teacher-student sex scandals. Infamous teachers such as Gordana Stefulic abuse the legal system to file SLAPP lawsuits to instill a sense of fear to anyone who speaks out against her. The feminist movement and attorneys such as Giselle Basanta are also accountable for the infringement of free speech rights in the USA and Canada.
When will Canadians wake up and see that the public sector unions and their cronies have no interest in the public, and seek to enrich themselves at the expense of democracy, civil rights and transparent and fair governance.
Reblogged this on Public Secrets and commented:
More evidence (from Europe!) that high tax rates harm economic growth and general prosperity. Barack Obama, take note.
[…] The Punitive Economic Cost of Class-Warfare Taxation | International Liberty. […]
The Piketty policies would dramatically increase corporate inversions.
When the top executives of a firm become subject to confiscatory tax rates, they will adapt by leaving the country. It’s only logical that they will also move the company’s headquarters. France has provided many recent examples.
If the boss leaves the country, many of the jobs he created disappear.