Go Back, Jack, Do It Again

Bad policy is always bad policy even when it is forgotten how bad it was.

To collectivists, tax policy is the same as communism. These policies never produce the results they promise because they never are implemented correctly and will certainly, maybe, work this time when they are in power.

I was reading about Kathy Hochul’s ridiculous pleading for the rich New Yorkers (who would be punished by Hochul’s tax policy) to patriotically come back and let the NY taxmen take more of their money as well as more stories of personal and capital flight from states whose government believes punishing success is productive policy. I recalled the time my wife and I lived in Scotland for three years, from 2010 to 2013, and that during our expat assignment there, the UK government implemented a mild version of the same sort of wealth tax the money grabbing progressives promise for the US.

The British government anxiously awaited the self-assessment returns from January of 2012, when most prior years income tax is paid by the better-off. 2012 was the first year following the introduction of the 50 percent top rate which had been expected to boost tax revenues from self-assessment by more than £1billion. Given there is never enough money to pay for all the adventures politicians can conjure, the Brits anxiously anticipated some new cash to spend, but the first receipts of the new wealth tax in the U.K. brought disappointing results to British Treasury officials.

Britain’s Telegraph newspaper reported that the U.K. Treasury–in the first test of the wealth tax policy introduced in 2011 generated 509 million pounds less for January than the same month in 2011. The Treasury had projected that monthly revenues would increase by more than 1 billion pounds. At the time, the Wall Street Journal reported that preliminary figures show that Britain’s 50% top marginal income-tax rate may have reduced tax revenue from top earners by as much as 5%, compared to the old 40% top rate.

What happened is something that always happens. The Brit numbers teach that the targets, the richest taxpayers, simply shifted their incomes, or themselves, offshore, or deferring income, or otherwise arranging their affairs to avoid the confiscatory new top tax rate. Of course, the left called that unfair—because the rich are usually better at protecting their assets—who knew that targeting the rich would result in totally predictable behaviors like moving from California and New York to Florida, Texas or Tennessee?

But this is the predictable consequence of a tax rate whose animating purposes are envy and spite.

There’s a lesson here for any enterprising “democratic socialist” who thinks the Sheriff of Nottingham was the hero of the Robin Hood legend, not that they are likely to heed it any more today than they did fifteen years ago.

This isn’t something that is unknown to any who follow the thoughts of contemporary conservative economists like Walter Williams, Thomas Sowell, Milton Friedman, F.A. Hayek, Ludwig Von Mises or Murray Rothbard —or historical thought leaders like John Locke and Adam Smith.

“Progressives” deny and enjoy simultaneously demeaning the increase in income tax receipts due to the rate cuts in Reaganomics. They ignore the Laffer Curve and as Thomas Sowell pointed out, the taxmen are completely unburdened by the weight of knowledge of history. In 2011, Sowell pointed out that we have seen this movie because it premiered in 1921 – when the rich didn’t stop working, but their capital did. He wrote:

“Ninety years ago — in 1921 — federal income tax policies reached an absurdity that many people today seem to want to repeat. Those who believe in high taxes on “the rich” got their way. The tax rate on people in the top income bracket was 73 percent in 1921. On the other hand, the rich also got their way: They didn’t actually pay those taxes.

The number of people with taxable incomes of $300,000 a year and up — equivalent to far more than a million dollars in today’s money — declined from more than a thousand people in 1916 to less than three hundred in 1921. Were the rich all going broke?

It might look that way. More than four-fifths of the total taxable income earned by people making $300,000 a year and up vanished into thin air. So did the tax revenues that the government hoped to collect with high tax rates on the top incomes.

What happened was no mystery to Secretary of the Treasury Andrew Mellon. He pointed out that vast amounts of money that might have been invested in the economy were instead being invested in tax-exempt securities, such as municipal bonds.”

Only stupid people sit around and do nothing as the looters steal their productivity.

Anyone who says with a straight face that government deserves to take 40 cents of every dollar in income instead of 35 cents to fund spending without end is an idiot, an ideologue, or a liar…or more likely an economically and historically ignorant progressive (or as the communists style themselves today, “democratic socialists”).

Every time this happens, I am reminded of the chorus from Steely Dan’s “Do It Again:”

You better go back, Jack, do it again,

Wheel turning ‘round and ‘round,

You go back, Jack, do it again.