Saturday, April 16, 2011

The Budgetary Deficit Political Challenge End Game Is More Tax Revenues And Not Higher Tax Rates On The Rich

From The Washington Times Opinion "Obama’s spray-on hair of fiscal policy" by Milton R Wolf:
Politicians have built entire careers on blurring the line between tax rates and tax revenues. The tax rate is, of course, the percentage at which, say, an income is taxed, while the tax revenue is the total amount of money the government collects. Just as lower prices in a discount store can paradoxically generate higher total profits for a retailer, lower tax rates often generate higher tax revenues. The converse is equally true, with higher prices and higher tax rates yielding lesser benefits.

Throughout time, class-warfare politicians have learned this critical distinction between tax rates and tax revenues the hard way.
It has become increasingly obvious that to balance America’s national budget, we must cut spending and optimize tax revenues. The challenge is to find the tax rate that will best yield the necessary revenue.
This economic reality spares no political party. When Democratic President Kennedy and Republican Presidents Reagan and George W. Bush reduced income tax rates, total tax revenues coming into the Treasury increased because, as JFK explained, “a rising tide lifts all boats.” When Democratic Presidents Carter and Clinton and Republican President George H.W. Bush raised income tax rates, total tax revenues fell. The same holds true for other types of taxes. Reagan’s capital-gains tax increase reduced revenues, while tax-rate reductions instated by Mr. Carter, Mr. Clinton and George W. Bush yielded increased revenues.
Read the entire Opinion piece here.

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