The budget gap is an issue politicians constantly promise to fix, but in practice rarely do. While some propose slashing spending, others often say the rich can pay for it all with additional taxes. But would that really work to boost revenue?
Wall Street Journal wealth reporter Robert Frank told FOX Business Wednesday that, intuitively, it may sound like raising taxes would naturally increase revenue. But history, according to Frank, paints a different picture. Generally in the past when taxes were raised on the wealthy, it has resulted in a decline in government revenue. On the other hand, when taxes were lowered, it's typically resulted in an increase.
Appearing on FOX Business’ Varney and Co. , Frank explained that while the government is in a sudden need for a lot of money, given the massive amount of cash spent in an attempt to ward off a depression, wealthier Americans have taken a huge financial hit during the recession.
With the comeback of the stock market and the Dow crossing back over the 11000 mark, wealthier Americans have seen some improvements. So now that these individuals have more cash on hand, leaders in Washington propose taxing them more heavily to shore up the government's revenue.
Why is this? On a state basis, the wealthy sometimes leave the state they’re in to avoid heavy taxes, flocking to lower-tax states, said Frank.
At the federal level, the wealthy are much better able to manage their earnings in a way that minimizes their income during higher tax years, he added. They can put money into IRA accounts, use business losses to offset gains, among other strategies to shield income from taxation.
Frank said that it seems dishonest when politicians talk about just taxing the rich, who proportionately don't make up a large number of people. “What always ends up happening is that you never get enough money from those at the top... so it always come out to everyone is going to be taxed more."
You Make It. They Take It.
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