Does Taxing the Rich Really Work to Improve Equality?
In the name of "fairness" and "equality", many in power propose heavily taxing the rich in order to redistribute their wealth to those among us who are less fortunate. But does this policy actually meet its desired end? Click through to find out!
We've tried this before...
In 1916, in order to pay for WWI, Congress passed a law that raised the tax rates on incomes over $300,000 to 70%.
And as a result...
From 1916 to 1918, the number of Americans earning more than $300,000 decreased by half.
So the government tried something different...
From 1921 to 1929, marginal tax rates shrunk from a high of 77% to 24%. Consequently, the government collected record tax revenue (enough to nearly pay off the national debt!).
History proves there is a difference...
In 1918 with a 70% marginal tax rate, only 20% of taxes came from incomes greater than $300,000. However, by 1926, 65% came from top earners.
What have we learned?
Steeply progressive income taxes fail to generate greater tax revenue for two reasons: one, people will find ways to avoid paying the full tax by investing their wealth in other ways such as growth stocks, insurance annuities, and overseas investments. Second, as people's productivity is taxed more, they become less productive, therefore producing less to be taxed. For these reasons, high-income taxes are futile at best in redistributing wealth.
To learn more, click here.
To learn more, click here.