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Friday, June 24, 2011

Conversation with my uncle

Let me start this by saying I have no political party affiliation.  I believe that 95% of our politicians are completely inept.  I believe in the Constitution and small government.

I had a conversation with my uncle yesterday.  He has been a very successful investor over his lifetime.  We were discussing an overseas investment he is going to make.  That led to our rant on our country's current regulations and taxes on business.  I've seen these stats before but they came across an email I read this morning, so I thought I would share.

From the S&A Digest:
*** "Finally… an interesting data point to consider for those of you interested in the tax revenue discussion we've been having in the mailbag this week. From 1951 through 1963, the U.S. maintained extremely high marginal tax rates. The lowest rate of federal income tax was 20%, and the highest equaled 91%. The tax structure back then generated revenue equal to 7.7% of GDP.

Marginal rates were lowest from 1988 through 1990, when the lowest rate was 15% and the highest rate was 28%. With that structure, federal income taxes brought in revenue equal to 8.1% of GDP. (This information comes from Alan Reynolds' well-sourced piece in the June 16, 2011 Wall Street Journal.)

The point is, the liberal Democratic policy goal of using income taxes for social engineering is extremely inefficient. It lowers tax revenues at a time when the government is deep in debt. The amount of revenue generated is only one small part of the puzzle. What goes unmeasured is the resulting disincentive to work and invest under high marginal tax rates. And yes, this second consideration is vastly more important than merely the technical detail about revenues. But the technical detail about revenue is a clearly proven fact that the tax-'em-until-they-bleed crowd can't ignore."***

The people who make the most know how to hide the majority of their income.  Or they just leave the US for a more business friendly nation.  So all this really does is hurt the middle class.  I have to give props to the Republicans right now for fighting the tax hikes.  Statistics don't lie, and they say raising taxes actually lowers tax revenue.

I hope everyone has a wonderful weekend!
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