This essay unscrambles gross misconceptions that have made rational debates about tax policies virtually impossible for decades.
Trickle Down Theory and Tax Cuts for the Rich
Even when the left’s heroes explain the truth they remain in willful disbelief. Many of both sides engage in such mindless reactions but it seems to me that the left reaction to logic is more deliberate and unreasoned.
Tax cuts for the rich
Thomas Sowell does an astonishing job of cherry picking the evidence he uses to make his argument that lower taxes on the rich produces higher tax revenues. Economies have many more moving parts than tax rates to examine before drawing the conclusions made in this book. He fails to mention the near non-existence of a middle class prior to WWII.
He conveniently omits the prosperity that all income levels enjoyed during the Clinton administration when tax rates were higher than they are now or that the economy during George W. Bush years having the slowest growth since WWII. And that was in the context of a massive housing bubble where millions of homes were being built, employing millions, for people who couldn't afford them. Or that only the upper income brackets saw any benefit from two rounds of tax cuts targeted to the rich while everyone else's income remained stagnant. The tax cuts exceeded the total revenue that was the government was taking in at the time taking us from a balanced budget to massive deficits.
His point is well taken that high tax rates on the wealthy is counterproductive. But the same argument cannot be made when tax rates are at a historic low as they are now. Lowering tax rates only work when rates are high enough to produce the disincentives for investments he describes. That situation does not exist in 2012. The passion for lowering tax rate rates on the wealthy today is directly related to the campaign money they provide.