Unburdened By What Has Been

History is a great teacher if progressives would only listen and learn.

A point on the unrealized gains tax: allegedly it only applies to people with over 100 million in annual asset growth. As people begin to find ways to avoid or offset such unrealized gains, the money flowing into government coffers begins to dry up. The thing that won't dry up is the government's addiction to spending, so to keep the party going, the threshold will be lowered over time. It will get to people with less than 100 million in asset growth within ten years.

There is a relatively recent example of how raising taxes beyond a certain point, especially on "the rich", doesn't increase tax revenues, it decreases them.

In 2011, the British government enacted a fifty precent tax rise. It didn’t work out so well.

See this 2012 Wall Street Journal editorial, David Cameron’s Tax Lesson: A 50% Tax Rate Yields Less Revenue Than Advertised:

“Speaking of higher taxes (and President Obama always does), there’s news from once fair Britannia.

Preliminary figures out this week 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. Tax revenue from those filing self-assessments due January 31 was down some £500 million versus last year…

What this week’s numbers teach, however, is that Britain’s richest taxpayers are simply shifting their incomes, or themselves, offshore, or deferring income, or otherwise arranging their affairs to avoid the confiscatory new top tax rate. Maybe that’s unfair, too—the rich are usually better at protecting their assets—but it’s the predictable consequence of a tax rate whose animating purposes are envy and spite.

There’s a lesson here for the Obama Administration, not that it is likely to heed it any more than Mr. Cameron.”

This isn’t something that is unknown to students of the Austrian School of Economics – those of us who follow contemporary conservative economists like Walter Williams, Thomas Sowell, Milton Friedman and thought leaders like F.A. Hayek, John Locke, and Adam Smith.

As Thomas Sowell points out, Democrats are completely unburdened by the weight of knowledge of history - unburdened by what has been, so to speak. We have seen this movie, and it premiered in 1921 – the “rich” won’t stop working but their capital will:

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.”

Anyone who says with a straight face that government deserves to take 50 cents of every dollar in income instead of 35 cents - and tax money that was never real - to fund spending without end is an idiot, an ideologue, or a liar…or more likely an economically and historically ignorant “progressive”.

Never has it been truer that people who ignore history are doomed to repeat it.