Lower tax rates increase government's tax revenue
Published: Saturday, October 09, 2010, 10:24 AM Updated: Sunday, October 10, 2010, An ad for a candidate for governor claims that reducing tax rates will lower the revenue to Oregon's government by $800 million. Experience proves that government's revenue actually increases when tax rates are lowered.
For some reason, many people refuse to acknowledge the economic boom (including increased tax revenue) created by the Reagan tax cuts. So let's look at an earlier example.
the Coolidge/Mellon tax cut lowered the federal maximum marginal income tax rate (i.e. "taxes on the rich") from 73% to 25%. Revenue to the federal government rose by 2%. At the same time, the percent of the tax burden paid by "rich" people nearly doubled.
In 1932, the federal maximum marginal income tax rate went from 25% to 63%. Government tax revenue dropped from $834 million in 1931 to $427 million in 1932. The tax burden on people making less than $25,000 went from 21% in 1931 to 36.5% in 1932, while the burden on the "rich" decreased!
Our Founding Fathers knew that increased tax rates lower the tax revenue to the government.
" [if] the government needed more revenue it would increase taxes and try other experiments like adding penalties. For a while tax revenues would increaseuntil people found ways to elude the new taxes. Government officials would get the false impression that raising taxes also raises the amount of money going into the federal treasury. This false impression would take a long time to correct. Necessity, especially in politics, often occasions false hopes, false reasoning, and a system of measures correspondingly erroneous
" Taxation policy requires extensive information and a thorough knowledge of political economic principles. Anyone who understands these principles will not want oppressive taxes nor will they want to sacrifice any group of citizens to get more tax revenue.
"The most productive system of obtaining governmental revenue will always be the least burdensome. In order to tax judiciously, the person with the power to tax should understand the general characteristics, habits, and thinking of the people, and the countrys resources. Let every thinking citizen judge for himself who has the required qualifications." Federalist Paper # 35 [paragraphs 4, 11]*
*The Federalist Papers: Modern English Edition Two
Lower tax rates increase government's tax revenue | OregonLive.com