It looks as if the administration and the lame-duck Congress are hell-bent on increasing taxes on "the rich," and we should all care about that because the U.S. already has such a levy: It's called the Alternative Minimum Tax.
It was put in place in 1969 to catch a handful of rich folks who were not paying their "fair share." But next year, thanks to bracket creep, the AMT will snare as many as 20 million middle-class Americans as well.
Is that fair? That's how "tax the rich" works. Raise taxes on wealthy people first, then extend them to everyone else later, including the middle class.
In 1986, capital gains taxes were raised sharply. Before the rate hike went into effect, total revenues from capital gains hit a then-record high of $328 billion. But four years later, after the higher rates went into effect, capital gains revenues had plunged 62 percent, to $124 billion.
Again in 1990, the "Omnibus Budget Reconciliation Act" raised taxes on the rich to make things more "fair" and boost revenues to reduce the deficit. How did that work out?
In 1989, tax revenues as a share of GDP totaled about 8.3 percent. By 1992, after the tax hikes kicked in, they dropped to 7.6 percent.
Similar foolish experiments in raising taxes on the rich were tried in 1932 and in 1937. Both times, tax revenues plunged as the economy tanked.
By contrast, part of the 1996 Clinton budget included an 8 percent cut in the rate on capital gains. That year, total capital gains in the U.S. stood at about $260.7 billion. By 2000, after the lower rates took hold, capital gains income surged 147 percent to $644.3 billion.
You'd think such clear lessons would be heeded. But they're not. If you let successful people keep more of their money, they tend to put that money to more productive use than the government. And that translates into more jobs and more people working and paying taxes, which means more money for the Treasury.
Benedict Frederick Jr., Pasadena