Should Taxes Be Raised Exponentially For The Rich

To understand raising taxes to increase government revenue would be a good idea, we must look at the Laffer curve. The Laffer curve, which Dr. Arthur Laffer leant his name to the curve after discussing it with some aides from the Ford administration, shows the relationship between tax rates and tax revenues. I will link a picture to show what it looks like. Basically, there is a prohibitive range and you don't want to raise taxes very high or else you will actually lose revenue. This is because people will start moving their money to tax shelters and some might reduce their production and work less if they are not making enough money. In the end, higher rates decrease revenue. Instead, lower tax rates increase revenue because people will start pulling money out of their shelters. Lower rates also means more economic growth. [1,2] Dr. Laffer also says: "Moving from total tax revenues to budgets, there is one expenditure effect in addition to the two effects that tax-rate changes have on revenues. Because tax cuts create an incentive to increase output, employment, and production, they also help balance the budget by reducing means-tested government expenditures. A faster-growing economy means lower unemployment and higher incomes, resulting in reduced unemployment benefits and other social welfare programs." [1] History To understand if this really works, we must look at history and see if it has work and there are four major examples of income taxes getting cut and driving up a surplus while also creating massive economy growth. I. Harding-Coolidge Tax Cuts When President Woodrow Wilson left the White House, the country was in a recession and we were in massive debt. The new president, Warren G. Harding, responded by cutting taxes from Wilson's 77% rate to 50%. When Harding died, Coolidge cut the rate down to 25%. What followed was massive economic growth and a huge budget surplus. Federal real revenue growth increased from -9.2% to 0.1%. Did more and people may more taxes? The answer is yes because the unemployment rate reduced dramatically allow more people to pay taxes. In fact, the rich payed more in taxes than the poor with their lower rates. In 1920, the share of revenue for those with over an income of $100,000 was 29.9%, but it was 62.2% by 1929. The national debt went from $28 billion to $17.65 billion. [1,3] II. Kennedy Tax Cuts John F. Kennedy was also a supporter of cutting taxes. From Coolidge's lower 25% rate, taxes rose to a staggering 90%. However, people started moving their money to tax shelters and through loopholes, so the government never received the revenue it needed. Kennedy wanted to lower the tax rates to increase economic growth and government revenue. Real income tax revenue growth increase from 2.1% to 8.6%. This growth increase government revenue dramatically. At the same time, less unemployed workers meant that more people could pay more money. Revenue exceeded expectations and skyrocketed. [1] III. Reagan Tax Cuts When he was younger, Reagan was inspired by John F. Kennedy's and Calvin Coolidge's tax cuts to cut taxes of his own. The tax rates went back down to 50% and then to 28% in two tax cuts during the Reagan presidency. Just like before, revenue increased from -2.8% to 2.7% and there was more economic growth. The unemployment rate reduced allowing more people to pay taxes. There was massive income mobility. The middle class moved into higher brackets meaning they payed more taxes. The rich also payed more taxes. The number people with an income over $1 million went from 5,000 to 35,000 and the number of billionaires rose to over 50 by the end of the 1980s. The fact is that lower taxes creates more growth in government revenue and at the same time increases economic growth. [1,4] Sources 1. Laffer, Arthur. "The Laffer Curve: Past, Present, and Future." Heritage.org. The Heritage Foundation, 1 June 2004. Web. 2. http://www.debate.org...... 3. Shlaes, Amity. Coolidge. New York: Harper, 2013. Print. 4. D'Souza, Dinesh. Ronald Reagan: How an Ordinary Man Became an Extraordinary Leader. New York: Free, 1997. Print.