Tax Rates and Tax Revenue Not Synonymous

Thomas Sowell makes two very good points that every conservative that embraces (and is an apologist for) fiscal responsibility and limited government should have ready. In his column "Slaves to Words" (17 May 2011, linked below), Sowell clearly articulates two basic economic realities.

1. "...tax rates-- whatever they are-- are just words on paper. Only the hard cash that comes in can cover government spending." (emphasis added)

2."...high tax rates that people don't actually pay do not bring in as much hard cash as lower tax rates that they do pay."

Sowell also makes the point early on that even if all the known millionaires and billionaires were taxed at 100%, the revenue from that taxation would not cover the expenditures of the federal government. I have several observations related to this point. First, the federal government could only tax these millionaires and billionaires at 100% one time. They wouldn't be millionaires and billionaires after that. Secondly, once the federal government taxes these millionaires and billionaires into oblivion, nothing is left for their home states to tax. Apparently this has not dawned on the state legislatures yet. Thirdly, punitive tax rates not only discourage the entrepreneurship that produced the wealth in the first place; they also postpone any possible repatriation of already "sheltered" wealth. (Ask the Kennedys and Kerrys about this disincentive aspect.)

Read Thomas Sowell's column, and employ his thoughts in your own rhetoric.

"Slaves to Words", Thomas Sowell

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