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Post Info TOPIC: Wealth flash

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Wealth flash

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.
> 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.

If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!
- Samuel Adams
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