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THOMAS SOWELL: You Can’t Tax the Rich – National Review Online

September 15, 2011

You Can’t Tax the Rich

They’ll flee the country before you can.

THOMAS SOWELL

SEPTEMBER 15, 2011 12:00 A.M.

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 or more — equivalent to far more than $1 million in today’s money — declined from over 1,000 people in 1916 to fewer than 300 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.

Secretary Mellon estimated that the amount of money invested in tax-exempt securities had nearly tripled in a decade. The amount of this money that the tax collector couldn’t touch was larger than the federal government’s annual budget and nearly half as large as the national debt. Big bucks went into hiding.

Mellon highlighted the absurdity of this situation: “It is incredible that a system of taxation which permits a man with an income of $1,000,000 a year to pay not one cent to the support of his Government should remain unaltered.”

via You Can’t Tax the Rich – Thomas Sowell – National Review Online.

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One Comment
  1. David permalink
    September 18, 2011 9:40 AM

    Of course! How do you think the rich got that way? They take care of their money (and in the process take care of themselves). Personal responsibility – what a novel concept! Imagine if the rich simply waited for everyone else to take care of them – they would never be rich to begin with!

    Obama thinks he has them over a barrel – hogwash! There are many countries that welcome money and help protect it from Uncle Sam. Of course the rich take advantage of that fact. There are many wonderful places in the world – America is just one of them, but not for long if we don’t get a handle on expenses.

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