It is no secret that many in the country feel "the rich" (defined currently by our savior – I mean President - Barak Hussein Obama as someone making $250,000 or more) should be taxed to the hilt. Never mind that the top 25% of earners pay over 80% of the tax bill in the U.S. already. They should pay more.
To that end there are a number of proposals for sticking it to "the rich". I'm not going to outline them all. That info is easy to find on the web.
But there is one very significant point that all liberals and soak "the rich" types quickly forget:
People's lives are dynamic.
People adjust to the changing environment. "The rich" will adjust to new taxes too.
Despite what you think and hope "the rich" aren't going to just lean forward, grab the ankles and take it with a smile. They will change their behaviors to minimize (if not totally negate) the effects of new and/or higher taxes.
This means they will sell taxable income producing investments like corporate bonds and dividend paying stocks and buy tax-free municipal bonds and non-income growth stocks. They will buy more tax-deferred products like annuities, IRAs and cash value life insurance. And they will likely buy more gold, silver, platinum and other metals and jewelry that are non-taxed (and untraceable for all intents and purposes). Maybe even some collectables too.
So the first year this new soak "the rich" taxes probably will increase tax collection. It takes time for "the rich' to reposition themselves. And in so reposition will incur some taxable transactions (like selling one stock to buy another).
But the second year the tax collection will be far less than predicted. Same for the third year. And by the forth year the actual tax collection will be much lower than what the experts predicted would be by soaking "the rich".
At that point there will only be two choices open to the Messiah:
1 – Try to pass new laws that make investments and vehicles that are currently tax-free or tax-differed no longer such;
2 – Raise taxes even more for another short burst of tax revenue increase.
(or some combination of the two.)
Either way, raising taxes to soak "the rich" is a well that ha a very limited supply. You can only go to that well so many times before it runs dry.
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