The Myth of High Tax Rates

By: Tomas Monette

A common rallying cry for high taxes is that billionaires, or millionaires, or owners of wealthy companies have too much money; or too much for one person too have. However the problem here is two fold; firstly, billionaires and millionaires can typically move their money to tax havens, places where these new policies need not apply. They move money into islands in the middle of no where; or small European countries where the tax laws enacted in their own home country will take no effect over them whatsoever. This brings me to my main point.

The Impact on Middle Class

With these new high taxes being implemented, and the fact that it does not hurt the billionaires or millionaires, meaning that the only people punished are the working men and women of America, or whatever other country that tries to enact this. This increased tax upon the middle class does the opposite of what is wanted, the middle class is one that spends quite a large sum of money, so whatever extra money they have we can assume will be spent moderately well in the economy and helps stimulate it, and its free market forces. However when they are taxed more the middle class has less money, meaning that it has to make due with what it has and the economy misses out on the growth it could have achieved. While popular Keynesian theory predicts that government intervention during a recession might be what is needed to get us out of said recession it is important to point out that in a regular time period when the economy is doing relatively well it does not make much sense to stifle the growth of the middle class. We can also see that this typically has the opposite effect that the people who want to implement this think it will. Many prominent socialists want increased taxes on the so called “1%” and higher taxes overall, thinking it will expand the middle class due to redistribution of wealth, but as shown the 1% do not really pay that tax, and the middle class’s growth is shortened due to oppressive tax increases that were though to protect it. Proving yet again (for the most part) the freer the market the better the middle class typically does.