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What Happens When You Raise Taxes on “The Rich”?

If you’ve read this far, you are either looking for some info to reinforce your values or to rebuke the selfish, money grubbing corporate elitists. Regardless, the question is vital and important, whether or not your personal choice of answers is supported. It’s vital because, while the question is being asked and answered in the states, it is also the strategy being employed by the President to address the financial challenges faced by the country. It is illogical to assume the results seen at the state level will not be those seen at the national level, too.

Art Laffer and Stephen Moore have written “Rich States, Poor States” for the American Legislative Exchange Council. The good folks at Net Right Nation pointed me at a Wall Street Journal column based on their work.

“Soak the Rich, Lose the Rich” tells what happens in states which enact high taxes, especially on the wealthy, and what happens in states which consciously enact lower taxes, especially on the rich. In a modern day rendition of “Atlas Shrugged”, no one should be surprised to find the wealthy tend to flee from where they are seen as merely a payday. It remains for the states so foolishly engaged to see whether they understand the real world implications of such events.

Laffer and Moore refer you to their research on New York and California and how they are faring. They also mention Texas and Tennessee and how they are faring.

Should whatever taxes you have be raised or lowered in these times? Should your state have an income tax or not? And what bearing does this information from the state level have on our national debate? At a minimum, it ought to make us consider again whether an Income Tax, high or low, is the best way to collect our needed revenues. It ought to keep us talking about the idea of the Fair Tax and its elimination of taxes based on earnings and its move to taxes based on consumption.

Most important, it ought to help us understand any plan, state or federal, attempting to tax its way into prosperity will fail, because it depends on the willing participation of those being taxed. The currently wealthy will avoid the taxes and the nature of the tax discourages the creation of new wealth. Time need not be counted on to tell us that about the President’s plan. We can see it in Laffer and Moore’s research. Then again, there are none so blind …

Blue Collar Muse

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