Tax Increases Mean Less Revenue: Your Common Sense Guide
I offer this common sense guide for the great battle to come.
At the outset, it must be noted that, in practice, politicians don’t actually raise taxes so much as they pass laws to increase tax “rates,” i.e. income rates, sales tax rates, etc. They do in an ill-founded pursuit of more tax revenue.
It is ill-founded because tax rate increases, over time, yield less revenue than tax rate cuts. For instance, when the economy was bad in the early 1990’s, the California legislature raised tax rates and over a 3 year period, revenues actually dropped. By 1999, Bill Clinton’s tax rate increase resulted in the highest overall tax burden in our history – a recession naturally followed which led to declining revenues.