Does raising taxes on the rich reduce the nations economic growth by reducing incentives for investment?

Question

Is there some optimum point at which taxes should be to get the best return on both economic growth and revenue to fund gov't programs.

Could raising taxes too high---even just on the wealtiest people---cause a reduction in revenue to fund gov't programs and a reduction of GDP?

Could raising taxes also decrease the competitiveness of American businesses on the international market and cause more jobs to be exported overseas?

[[Please STAR this qestion if you think its interesting]]

Answer 1

Lowering taxes increases revenues to the goverment. It's a proven economic fact that Democrats continually ignore because their primary objective is to punish successful people.  

Answer 2

Interesting question, it depends on what you tax.

If you tax industries, of course there could be some decline.

But if you merely tax "profits", this could encourage companies to spend money on "research" (or waste them who knows) to reduce the tax.

It's much more complicated than a "flat tax" that people seemed obsessed over.

Answer 3

It might if it were at all effective.  But a study just last week showed that 2/3 of all American companies pay no income tax.  So unless there's a change in the way the taxes are assessed or collected, it's all just window dressing.  Window dressing that companies use to justify doing what they want to do anyway, like outsourcing.  The only thing that would make American companies competitive would be for Americans to be willing to work for the wages paid in third world countries.  

Does allowing other countries and foreign nationals to buy up half the companies in this country improve the situation?  

Answer 4

You are describing the supply-side economic theories that have never worked in actual practice.  Putting more money into the hands of the most consumers, i.e., middle class and poor people, actually drives the economy.  These groups spend their money thereby creating demand for goods which in turn encourages economic investment and economic growth.  Investors will rush to supply money to businesses that can make profits. Also, with more money, middle class people can become bigger investors.

The "demand-side" economics of the Democrats makes much more sense and actually works.

Answer 5

Joe Middle Class has been told that it's the rich peoples fault for his position in life.  He has been told that if we tax them more, then you will be better off.  Joe has been lied to, but it sounds better then reality.  Taxes on the rich means they make less money.  So they raise prices, they outsource jobs, they get tax shelters, and they move their business to a tax friendly nation.  All of these things to protect their bank account.  Meanwhile poor Joe, sees less jobs, sees higher inflation, and a bigger deficit to pass on to his kids.  The reality is that Joe has to get better educated, work a higher skilled job, save his money and invest in his future and his kids future.  No magic tax plan alive will make Joe's future brighter than doing the work necessary to secure it his own self.

Answer 6

Maybe we should just tax GREED

Answer 7

No.

We've had EIGHT YEARS of tax cuts for the rich and LOOK AT THE SHAPE THE ECONOMY IS IN TODAY.

Are you people incapable of learning?

Answer 8

Yes, it most definitely does.  

Answer 9

I think that considering we are in an economic collapse, after two terms of bush coddling the rich and providing tax cuts out the yin-yang....  one can no longer make that claim with a straight face.

Let's give the middle class a break for a change - shall we?

Answer 10

It's not a cut and dry issue. Taxes were higher under Clinton and the economy was stronger than it is now.

Answer 11

On paper, with all other factors remaining equal, raising taxes too high on the wealthy will inevitably stall growth.

Since the US does not exist only on paper and all things do not remain equal, you're question is nearly impossible to realistically answer.

Answer 12

It sure reduces the economic growth of people who are overgrown. Your theory if true would work great for the middle class too. Instead of having one big investment you get a million small investments creating a progressive growth for everyone, including those overgrown.

Is the reason Obama gets more funding for his campaign than McCain.

Answer 13

If reducing taxes on the richest of the rich increases revenue, then reducing taxes on middle class workers would also increase revenue by giving them more disposable income.

Answer 14

Tax revenues increase for the government everytime taxes on the wealthy and the corporate taxes are reduced.  It is historically constant.  Job growth increase when the corporate tax rate is lowered.  Also, stocks and mutual funds grow at much faster rates during these low tax times.  What does this mean for us?  Our social security and pensions and other retirement accounts are all dependent on the market.  If the market is doing fine, then our retirements are doing fine.  Following the market drop after 9/11, those tax cuts rapidly rebuilt our econmy.  We had the fastest, largest economic growth over any 5 year period leading up to the end of last year.  the DOW hit record highs.  The mortgage crisis this year and the high energy prices this year have hurt the economy but it will recover.  It always does.  People must also keep in mind that during the Clinton administration, while taxes were high. The US saw a great deal of jobs created as a result of the growing internet based business, but it also saw the largest number of jobs outsourced during any administration including this Bush administration.

Answer 15

Yes it does reduce the incentive to invest, and so does raising the capital gains tax, which Obama has also promised to do.

History has proven that excessive tax increases actually lead to less tax revenue, as it discourages working, saving, and investing. It also allows for more government spending. [less tax revenue + more government spending = larger deficit]

On the other hand, decreasing tax rates has always resulted in faster growth, rising incomes, and more job creation. Lower taxes have also increased tax revenues, in part by reducing the incentive of the "rich" to hide, shelter, and underreport income. [more tax revenue + less government spending = smaller deficit]