Monday, October 31, 2011

Taxing the rich?

An interesting article on taxing the rich. It doesn't actually work. Even jeffy simpson understands that.

People who want to tax millionaires aggressively can let their imaginations run wild. A 1-per-cent wealth tax, levied in 2020, could theoretically yield $70-billion, or enough to take care of whatever federal and provincial deficits might still exist. A 4-per-cent wealth tax could theoretically yield $270-billion – or enough to pay the entire cost of operating the federal government this year.

It looks so easy – which is why a “millionaire’s tax” is all the rage these days. But it’s not as easy to execute as it looks. Franklin Roosevelt’s Revenue Act of 1935, known alternatively as the Wealth Tax Act or the Soak the Rich Act, raised top marginal tax rates to 75 per cent on the incomes of millionaires. Predictably, the tax never raised the revenue that the New Dealers anticipated. People simply reported less income – effectively cancelling the tax increase. FDR proved that a wealth tax can work only through ruthless prosecution – and high risk of imprisonment – of the rich.

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