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Not Docile Sheep

Alan Reynolds, a senior fellow at the Cato Institute writes in an article on who will pay for the recently passed health care reform (aka ObamaCare) that appeared in the Wall Street Journal on March 30, 2010:

“Add it up and the government is counting on squeezing an extra $1.2 trillion over 10 years from a tiny sliver of taxpayers who already pay more than half of all individual taxes.

“It won't work. It never works.”

Reynolds explains it this way, and cites several supporting studies:

“In short, the evidence is clear that when marginal tax rates go up, the amount of reported incomes goes down. Economists call that "the elasticity of taxable income" (ETI), and measure it by examining income tax returns before and after marginal tax rates claimed a bigger slice of income reported to the IRS.”

To put it another way, Reynolds writes:

“Punitive tax rates on high-income individuals do not increase revenue. Successful people are not docile sheep just waiting to be shorn.”

Reynolds concludes by saying:

“The federal government has embarked on an unprecedented spending spree, granting new entitlements in the guise of refundable tax credits while drawing false comfort from phantom revenue projections that will never materialize.”

A great article worth reading in its entirety although it might be a little too difficult for many members of Congress to understand.

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