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Originally Posted by Colin
Put simply, taxes were higher during the 90's. Bush and the Congress lowered them, so they were higher. That cannot be denied.
Tax rates were higher. Taxes collected were lower. So yes, I do deny your premise.
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Second, people who paid a ton of taxes in the 90's did so gladly and would do so again. Paying taxes and being rich is better than being poor and paying none.
Edited the bold.
Of course being rich is better than being poor. That has never been the question. The marginal rate went from 39.6% to 35% under Bush. You could possibly argue that a return to 39.6% wouldn't be too terrible. Obama is talking about a marginal rate of well over 50% though, in addition to dividend hikes, capital gains hikes, corporate tax hikes, and windfall profits taxes. You're comparing apples and oranges. Carter is the baseline, not Clinton.
The question is whether or not higher taxes on rich people (a) yield more tax revenue and (b) harm economic growth (aka "jobs").
As for more tax revenue, no, higher tax rates don't produce it. The taxes under Clinton were very slightly higher than under Bush, as a percentage of GDP, while tax rates were higher at all income levels. Your argument holds up against the conservative spin up to this point. Where it unravels is in the fact that the economy was on a downward trajectory for the last few years of Clinton's term, caused largely by the reluctance of people to invest money after the dot com collapse. This culminated in the fact that we were in an actual recession at this point during Clinton's presidency, as opposed to the imaginary one that we are told we're in right now.
Bush cut capital gains and dividend rates, leading to sustained economic growth and heavy investment through 2006. Then the mortgage fiasco somewhat mirrored the dot com fiasco and here we go again. Tight capital markets now have been caused by a sheer lack of capital though, as opposed to tax policy. You can take a position either way as far as which is worse. I really don't know. What I wonder now is - Do we want people to be reluctant to invest or anxious to invest?
Over the long term, the amount of tax money collected from capital gains is fairly constant. Republicans who say that cutting capital gains will produce more revenue are only telling half the story. What happens is as follows. Capital gains rates go up. Joe Schmo makes $40,000 a year and wants to buy a house. He can't afford to sit on his investments until rates go down, so he eats the higher taxes and sells his investments. Richie Rich, on the other hand, can take his income from munis and life insurance policies until tax rates go back down, so that's what he does. When rates go down, he and people like him begin to dip into their taxable investments before someone comes along and raises the rate again. That last sentence is why receipts appear to go up when rates are cut, but it's only temporary. Over time, receipts level off regardless of higher or lower rates.
So, if we don't collect more tax revenue, why do we raise the rate? Does it contribute to job growth? No, it does exactly the opposite. Richie Rich's withdrawals of cash for income and reluctance to move investment income around leads to stagnation in the equity markets and puts upward pressure on interest rates, since he and those like him are tightening the money supply. They're still making millions, just like you said, but guys like Joe Schmo are taking it in the shorts.
Then why do we do it? According to Senator Obama, "because it would be more fair." Fair to whom, exactly?