Here’s another great piece by columnist Michael Barone about the common liberal refrain that we must raise taxes on the rich. (emphasis is mine)
High earners don’t sit around waiting to have their money confiscated any more than chickens sit around and let you pluck out all their feathers. They pursue other options.
This is most obvious when you think about capital gains. The ederal government doesn’t try to tax capital gains — the increase in values of your stocks or your house — every year (professor Bittker had us in knots explaining how it might do this). You pay capital gains on a stock or house only in the year you sell it.
What happens if the capital gains tax goes up from 15 percent to 50 percent? People stop selling stocks and hold on to their houses if they possibly can. And when cap gains rates go down? They’re more willing to sell, pay the lower tax and invest in something else.
That’s why the government’s total revenues from capital gains have tended to rise when the capital gains tax rate is lowered. And why increases in the capital gains tax rate never raises the amount of revenues static models estimate it will.
