“Buffett Tax” not working out for California

President Obama and his “tax the rich” acolytes on the left would have us believe that the federal government will raise significant revenues if only Congress would raise taxes on the “rich.” Unfortunately for them, real-world economics doesn’t actually work that way. In fact, federal revenues over the span of decades have been approximately 19 percent of GDP.

At the state level, the tendency for the “rich” to avoid higher taxes has been even more dramatic. See California as an example where the top income tax rate is 10.3% and where tax revenues have plummeted in recent years.

See, the problem is (as Jonathan Williams of ALEC pointed out) that the way to grow revenues is to create new taxpayers, not gouge the ones you have. Rather than raising taxes and thus pushing people out of the labor market (either voluntarily or through job loss), Obama should be lowering marginal rates and reducing job-killing regulations to encourage economic growth that will in turn, generate more tax revenue.

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3 Replies to ““Buffett Tax” not working out for California”

  1. Yes, 19% of GDP historically, however this year it’s estimated federal receipts will be less than 15% of GDP. I agree that reducing regulatory requirements would help. As for your other point that a reduction in taxes will result in increased revenue – poppycock.

    1. Reducing tax rates won’t always generate more revenue, but when vast amounts of human and financial resources are on the sidelines, not engaged in productive economic activity, reducing regulations and lowering marginal tax rates CAN increase tax revenues.

      With corporations sitting on mounds of money and work force participation at historically-low levels, this is definitely the case.

  2. “For a nation to try to tax itself into prosperity is like a man standing in a bucket trying to lift himself up by the handle.”
    Winston Churchill

    The solution to the current national jobs and debt crisis is no more about taking from the rich to give to the poor than was the scheme of insuring the moral hazard within our national real estate lending markets, in order to ensure the poor a greater opportunity at the risk of those with available capital, while likes of Goldman Sachs capitalized by transferring the true costs of those same risks to the U.S. tax payer, which by the way helped pave the way to the jobs and debt crisis that we all currently face.

    It is now, as it was then, and will be next week, next month, next year, or next decade. IT’S ABOUT THE INCENTIVES! And by the way, what incentive is there to attempt to lift the handle of the bucket that we are all currently standing in? Perhaps a clarion call to kick off our collective house shoes and stop being so soft…No, people must be rewarded for their efforts, not continuously punished, otherwise their efforts should not, and will not, be made in the first place.

    Set the conditional incentives required to draw-in those who would innovate and create jobs, allow them to reap the rewards of their hard work, get out of their way, and watch them flock to this nation. Watch them compete to invest their capital in the potential returns that this nation IS capable of! And, as you do so, watch the tax base of this nation begin to grow in every state as it has not grown for the last fifty years.

    Consider too the flip side of that for a moment. If we were to suddenly raise the tax rate on capital gains (currently only 15% for guys like the “Oracle from Omaha”), while simultaneously lowering the tax rates on annual incomes, would Warren Buffet suddenly feel better about himself and his overall contributions to society? He currently takes no salary (annual income to tax), and has made his living and vast wealth not by creating new products or innovations that benefit the world, or its poor, but rather off of the capital gains wealth from his market trading activity.

    Does he compete with you and I under the current tax structure by working the system to his advantage, and, in doing so; do we collectively gain something from his investments in worthwhile industries and companies? The answer is absolutely yes, he does and we do, but he certainly has his own best interests in mind when he attempts to sway the rest of us towards bearing the greater burdens that have been created by the incentives set by government under the current tax codes and regulator structures…If Mr. Buffet would like to feel better about himself, and those like him, then perhaps he should seek the win, win, rather than the “Buffet wins and the poor lose, again” model.

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