I had this interesting article and commentary sent to me:


> - Progressive tax
> rates create mountains of cash during good times that
> vanish during recessions.
> For evidence, consult California, New York and New
> Jersey.
>  
> http://online.wsj.com/article/SB124329282377252471.html
>  
>  
> This is dynamite
> stuff when you think about it. Boom times cause something
> of a "wealth flash".
> Incomes leap temporarily. Think of the recent real estate
> boom where hair
> dressers and parking attendants were suddenly making
> $300k/year selling
> houses.
>  
> The kind of people
> this happens to haven't gone to the trouble and
> planning necessary to shield
> this new income from high tax rates, so tax revenues jump
> as well.
>
>  
> Those who are
> accustomed to large incomes have the time and incentives to
> shelter their income
> from taxes, especially the highest rates. These people, the
> truly
> wealthy, continue to pay less in taxes than high
> progressive tax rates
> would suggest.
>  
> The spike in tax
> revenue created from this wealth flash is to legislatures
> like crack is to
> addicts. It gets immediately spent, and future budgets
> assume that revenues will
> always be this high, or even higher (assuming continued
> growth). That leads to
> the inevitable crash that state governments are
> experiencing
> now.
>  
> If governments saw
> this revenue for what it is and planned accordingly then it
> wouldn't be such a
> big deal. But that never happens. Instead, high
> progressive rates create
> budget expectations in boom times that cannot be met by
> high income earners
> during 'normal' times or a recession -- those
> earners don't exist any longer
> because the wealth flash has disappeared. So the burden is
> passed on to the
> middle class.