The goal of tax policy

Matthew Hoy
By Matthew Hoy on February 22, 2009

During the 2008 campaign, then-candidate Barack Obama dismissed tax policy as mainly as a method of getting revenue for the government and more as a way to redistribute wealth by making life more "fair."

Now that Democrats have all the levers of power, you have things like this from Rep. Jerry McNerny (D-Calif.) to look forward to.

When I got my time with him, I explained to him that even people who make $150k in Northern Cal. are not “rich” and should not be taxed as if they were. (A 1400 sq ft, 40 year old home here goes for over half a million, even after the housing slump. Then you add in real estate taxes, state income taxes, 10% sales tax, gas prices, utility costs, etc.) I also expressed my concern that about half the people in the country now pay no income taxes, so there is overwhelming incentive for them to keep voting for democrats and therefore higher taxes for the rest of us. He told me that he thought tax rates should go up for the very rich and that the top marginal tax rate should be 90%. I couldn’t believe what I was hearing, so I asked in a voice that many in the room could hear if he really meant 90%, and he said yes. Several people asked me after my turn was over if they heard correctly what he said, and were amazed when I said yes.

A 90 percent top marginal tax rates would cause economic expansion to slow -- or contract. No one in their right mind -- and taxpayers are typically right-minded -- would want to work an extra hour if it meant that the government took 90 percent of their income for that extra hour.

McNernry doesn't understand that -- and neither do too many Democrats. If you think the economy is bad now, just wait until the top tax rate is 90 percent again.

0 comments on “The goal of tax policy”

  1. Matthew, since the days of Nixon, I suspected that the purpose of taxes was, quite literally, to punish the government's enemies, and reward its friends. The purpose of tax policy certainly isn't to efficiently raise revenue for the benefit of citizens and the administration of government agencies, if actual outcomes are to be part of the purpose, anyway.

    I note that Pres. Obama and the Democratic Congress has taken this to heart.

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