Here Come Higher Taxes: Goldman On Imminent Tax Increases

Tyler Durden's picture

You didn't think China would fund America's insane spendorama for ever, did you. Here's Goldman on the second, and much more relevant, part of Obamacare and the stock market reflation trade: tax rates going through the roof.




Tax policy has gained attention in recent days as a result of the tax increases used to pay for health reform. In fact, this is just one of several potential tax debates over the next several months, with the expiration of the 2001/2003 tax cuts and stimulus tax provisions scheduled for year end, proposed and recently enacted corporate tax proposals, and the possibility of some form of consumption tax on energy or, in the longer term, a broader value added tax.

There is little possibility of changes for 2010, apart from the expiration of some stimulus-related provisions, but tax rates in 2011 are almost sure to rise on higher incomes as well as capital income. One consideration for lawmakers will be the different effect that tax policy can have in a zero interest rate environment. This may reduce the negative effects associated with increased taxation of labor and capital, but could exacerbate the negative effect of any increase in consumption-related taxes. 

The passage of health reform has done two things to focus attention on tax policy. First, it included a number of taxes to finance a portion of the new spending the package calls for. Second, it clears the agenda for the broader debate on tax policy that will begin in the next few weeks when Congress takes up its budget blueprint for 2011, which will lay the groundwork for the extension of some, but not all, of the tax cuts scheduled to expire later this year.

Tax policy over the next year is likely to see more substantial changes than at any point since 2001, and is likely to see taxation rise more than any point since 1993. After several years of relative stability in tax policy (the stimulus legislation was the one exception), the next few years will require decisions on several fronts:  

  1. Financing of health reform. Just under a quarter of the financing for the new spending in the health bill comes from an increase in the Medicare payroll tax rate on income over $250,000 (for couples) and the addition of a new tax of 3.8% on “unearned income” which includes most forms of income outside of wages, including capital gains, dividends, and interest.  These tax increases are scheduled to take effect at the start of 2013. The bill also includes $210 billion in health industry taxes, which take effect between 2011 and 2014.
  2. Extending the 2001/2003 tax cuts. The administration proposes extending most of the tax cuts set to expire at the end of the year, but would have the top two marginal tax rates increase from 33% and 35% to 36% and 39.6% (as they are scheduled to do under current law) and would set the capital gain and dividend rate at 20%, up from 15% now. We assume that the marginal rate incrases will take place, but that the capital gains and dividend rate is likely to end up closer to 25% for budgtary reasons. Whatever the outcome, the rate increase would take effect at the start of 2011.
  3. Extending stimulus tax provisions. The two most significant tax provisions in the American Recovery and Investment Act (ARRA) were the “making work pay” credit for individuals, which provides a refund of payroll taxes paid on the first $8,000 of income, and bonus depreciation for corporations. Several other smaller individual and corporate provisions were also included.   We assume that the making work pay credit will be extended indefinitely. However, bonus depreciation, which expired at the end of 2009, seems unlikely to be renewed absent significant renewed economic weakness.
  4. The administration’s corporate tax proposals. The Obama Administration included a number of corporate tax increases in its fiscal year 2011 budget, which if enacted are estimated to raise $440 billion in corporate tax receipts over 10 years. We don’t expect many of these to be enacted this year due to sentiment in Congress that most of these proposed changes would be better dealt with in the context of broad tax reform. Given the crowded political agenda, large-scale tax reform appears very unlikely this year.
  5. Climate legislation. This may seem like an odd item to include in a discussion of tax policy, but the recent debate over how to deal with carbon emissions has begun to focus on taxes more heavily, in two ways: first, there appears to be growing interest in limiting emissions from the transportation sector through a tax on gasoline; the energy industry has become more open to a tax, the auto industry appears to support it as a means of reducing volatility in fuel prices, and Senators Kerry (D-MA), Graham (R-SC) and Lieberman (ID-CT), who are seeking a bipartisan agreement on a climate bill, appear likely to include it in their approach. An alternative approach, though one that would have similar implications, is the “cap-and-dividend” approach proposed by Senators Cantwell (D-WA) and Collins (R-ME), which would redirect most of the revenue collected from a carbon emissions reduction regime back to consumers through the tax code.
  6. The fiscal commission and medium-term fiscal consolidation. Shortly after the November elections, the fiscal commission established by the president is due to submit recommendations to Congress on policies to balance the primary budget deficit by 2015. Medicare cuts on top of those just enacted to finance health reform would be difficult to enact, and the president has already proposed a freeze in non-defense discretionary spending, so there isn’t a great deal of spending left on the table to cut (though stimulus- and financial stabilization-related spending will taper off automatically). Therefore, it seems likely that the commission will propose at least some tax increases. It’s not even clear whether the commission will be able to agree on recommendations—a supermajority of members must agree—but if they do, this could lead to the consideration of significant fiscal policy changes toward the end of the year.

There are too many unknowns to predict with certainty what the combined effect of all of the various tax issues up for debate will be, but it is possible to at least take a directional view on where policy is headed:

Higher vs. lower incomes: It seems fairly clear that the income tax rates of higher income taxpayers will increase relative to the rates on lower income taxpayers next year. How much depends on two issues: first, whether Congress extends the tax relief included in ARRA that generally benefits low- and middle-income households, and second, whether Congress opts to allow higher income tax cuts to expire. As noted above, we expect both of these to occur, which should increase the differential between high- and low-income tax rates. This is likely to mean an effective rate for higher incomes similar to the 1990s, while the lower income quintiles remain relatively unchanged from where they are currently (the chart below shows data only through 2006, due to a long lag in reporting by the IRS).

Effective Federal Tax Rates

Labor vs. capital income: Policy is likely take a path leading to increased taxation of passive income, such as capital gains, dividends, and interest, certainly on an absolute basis, and potentially as a share of total taxation. This is due to the likely increase noted above in the capital gains and dividend tax rates as a result of the expiration of the 2001/2003 tax cuts, as well as the taxes on passive income included in the health reform package. The combination of these provisions is likely to mean a rate as high as 25% on both sources of income in 2011, stepping up to roughly 29% in 2013, from 15% today. The chart below puts this move in the context of historical rates on both sources of income.

Historical and Estimated Tax Rates on Capital Income

Income vs. consumption:  An increasingly prevalent view among outside observers is that lawmakers will ultimately adopt a value added tax to close the chronic budget gap.  There seems to be much less discussion of such a tax among lawmakers themselves, however. This isn’t surprising—there is little reason to promote the possibility of such a tax ahead of an election—but it does indicate that such a tax is probably not just around the corner.  That said, it seems likely that the debate over a a federal consumption tax in the US will intensify. First, as noted above, lawmakers have begun what is likely to be a long but gradual push toward fiscal consolidation, with the potential recommendations of a fiscal commission late this year. As we’ve noted elsewhere (for instance see “Fiscal Consolidation: What Will It Take?” US Economics Analyst 10/08, February 26, 2010), a value-added tax or its equivalent could be a politically attractive alternative to increases in the income tax, since the tax rate applied could be relatively low compared with an income tax rate increase. (There are clear drawbacks as well, such as the regressive nature of such a tax and the need to build an infrastructure to collect what would, at least at the outset, presumably be a fairly small tax. This would argue for applying such a tax only in the context of broad reform, so that income or payroll taxes can be adjusted simultaneously).  Apart from the possibility of a broad-based consumption tax, whatever legislation Congress ultimately adopts to reduce carbon emissions is likely to impose a de facto tax on consumption of energy. This debate has become more transparent of late, with proposals to tax transportation fuels directly as noted above. Neither of these is likely to have an effect on consumers in the next couple of years, but in both cases the policies could eventually replace some of the current revenue collected from income and payroll taxes.

Personal vs. corporate taxes: Apart from changes in how individuals are taxed, there is also likely to be a shift in the relative taxation of individuals and corporations. The Obama budget, noted above, would increase corporate taxes by 11% compared with current projected corporate tax revenue. The health reform package will increase corporate taxes by another 5% or so (these taxes are concentrated on the health industry), bringing the total increase in corporate tax liabilities to around 16%. In comparison, the personal income tax increases proposed—most of which we think will be adopted—would increase total income taxes by around 6%, and total personal taxes (including payroll taxes) by around half that much. It is also worth noting that the last major tax reform debate, in 1986, modestly shifted tax liability from individuals to corporations. 

The tax changes noted above are likely to occur over several years. Tax rates on high incomes and capital income will increase for 2011; tax increases in the health bill phase in between 2011 and 2014, and any taxation that comes out of climate legislation or broader tax reform is likely to be several years off.

The short term effect of these changes could vary substantially depending on when they are implemented. For instance, a capital gains tax increase in 2011 could have a counterintuitive effect, by prompting investors to liquidate holdings this year ahead of the increase in rates.  There is empirical evidence demonstrating that investors tend to spend a portion of cash coming into brokerage accounts, though the effect tends to be stronger for dividend income than for capital gains (see for instance Baker, Malcolm P., Nagel, Stefan and Wurgler, Jeffrey A., “The Effect of Dividends on Consumption,” March 2007).

A second possible counterintuitive effect is the significant difference in fiscal multipliers in a zero interest rate environment. A recent paper from the New York Fed explores the possibility that tax cuts on capital and labor could actually have a negative near term effect on demand when rates are at zero, by encouraging additional saving and reducing wage pressure with the eventual effect of higher real interest rates (see Gauti B. Eggertsson, “What Fiscal Policy Is Effective at Zero Interest Rates? Federal Reserve Bank of New York Staff Report No. 402, November 2009).

A more intuitive result is that the multiplier attached to consumption-related taxes increases substantially in a zero rate environment, implying that if lawmakers were to attempt to implement one of the consumption-related taxes in the near term, it could have an even more severe negative effect on demand than it normally would.   Of course, these results are relevant mainly to the short term effect of temporary tax policies meant as stimulus rather than the effects of longer term tax decisions. And there are clearly other considerations that must also be taken into account, such as the potential for a capital income tax increase to put pressure on equity prices, thereby decreasing demand.  The bottom line is that as lawmakers undertake what are likely to be significant changes in tax policy, they will need to be recognize that these changes will take effect in an economic environment different from any they have encountered in the past.

Alec Phillips

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Nihilarian's picture

Let's call it by what it is: Economic Tranquilizer.

Vacca's picture

Expect to see more businesses moving their operations overseas as a result and more individuals taking as much as they can offshore. Cant help but think that the economy will just get worse as tax rates go up.

This is where the government might finally understand how allowing companies to offshore more and more middle class jobs has not only decimated the ability of the middle class to consume, but also to pay taxes.

Mako's picture

All you need is one State to cancel their agreements (repeal Acts) with the Federal government and the rush will be on to that State.  

I have no idea what the State Attorney Generals are so upset about.   Cancel the agreements and be done with it.  The tax bills are going to have to keep going up otherwise, until the States are BKd.

The Federal government is in charge of running State programs, that is how their reach within the State.... it's done under State law.   If you don't believe me, go read your State code.  



cougar_w's picture

It's either higher taxes, or default. Could be both I suppose. But by promising to raise taxes "someday" you can continue to reel in foreign investors to buy bonds. So they have no choice but to say they are going to raise taxes "someday" even if actually doing so would fatally poison the economy.

In an informal race you claim you are not really racing in the hope that the other guy might believe you and slow up. Applies in a race to the bottom, too. It all comes down in the end to subterfuge and information warfare.

knukles's picture


You can bet your bottom quintile taxed dollar that for all the extra blood squeezed from the American Taxpayer, there'll be absolutely NO corresponding curtailment of expenditures.

Anybody wanna bet the under on all the business and wealth that's gonna make its way to more friendly tax, regulatiory and legal (read violation of secured debt holder's rights a la GM and Chrysler) environments? 
Not to mention the continued bastardization of the free-enterprise system by the Financial-Congressional Complex.

Once the money starts to disappear, that'll be the final straw along with diminishing rights, for once the do-ray-me is gone, no amount of bread and circuses gonna keep the animal spirits satisfied.

Let alone.....
Our tax money now going to bail out Greece via the IMF?  Shoot the Euro, solidify the dollar's waning preeminence. 

This is getting serious, folks.  Serious.

Time to start reconsidering traditional risk premia relationships.

twotraps's picture

that is exactly curtailment of expenditures.


Like a restaurant that has declining business...they keep raising prices to make up for all the shortfall.  Seems like a good plan. 



dark pools of soros's picture

it truly sucks since counties do go the extra mile and cut their budgets (at least mine is) but if we are going to just steamrolled by all this fed spending..  why the fuck shouldn't we all just go BK first before the country does?

Cognitive Dissonance's picture

Agreed. When you've got nothing left to sell but still are dependent upon the income, you resort to lying, cheating and stealing, those wonderful puritanical values we heard so much about from politicans over the last 20 (50? 100?) or so years.

DoChenRollingBearing's picture

Agree with all above.

Like I am going to invest in anything now.  From here out, it is wealth preservation for me.  Invest in anything, get taxed more.  Hire anyone, wow, that's taking a chance!  With the crooks in charge now...

As my taxes go up, the only thing I can see to do is to spend less.  Spending less has a bonus that a higher income does not: no taxes on unspent money!  Not much fun spending less though.

Buying, holding and eventually quietly giving away GOLD is another good alternative for longer term thinkers.

Rick64's picture

This is inevitable, so even if the economy was to recover and inflation sets in the taxpayer will still be in a recession.

A Man without Qualities's picture



Taxpayer is going to get squeezed with both higher taxes and yields that are going to be below true inflation.  For the average citizen, they are about to get even more poor over the next few years.

But never mind, just buy stocks and pray the PPT will watch your back and make you rich...

schoolsout's picture

well....what can one say?


It's like you're in a horse race riding a fukcing cow.

Sudden Debt's picture

These last few years, we learned 7 important lessons:

1.   YES, because we can

2.  YOU are part of this democrazy

3.  GIVE, and you will receive

4. MONEY, doesn't make you happy

5.    TO much of anything isn't good

6.    US, land of the brave


schoolsout's picture

Am I not seeing the 7th for a reason?

Nihilarian's picture

7. Chump change is the cost of these government entitlements and bailouts.

Problem Is's picture

7. Whenever a Goldmanite speaks, look for the cash motive.


7. Whenever a Goldmanite speaks, it is a trail balloon for the government.

Mako's picture

The only way this stops is if you get your State to cancel all the Federal program agreements.   The States will be going belly up and the Federal government will come in to restructure otherwise.  

Unless you take your State capital buildings back you can expect the bills to get bigger and bigger, until (insert your State here) goes belly up.  Texas is already expecting a $20 billion bill coming it's way, they have no idea, it's not going to stop.  

Restructuring of your State governments is coming up if they don't start canceling the Acts that allow the Federal government to reach into the State.   You have been lied to by your State government, they setup the agreements then blame DC for the problems.   The problem is in your State's capital dome.


bugs_'s picture

Could Goldman be right this time?


GlassHammer's picture

They are doing God's work so I can't see how they are wrong.  :)

VegasBD's picture

Except in the FX markets. Of course, God's never been good with money, he is all powerful but still needs mortals to fund his franchises everywhere. heheheh

Attitude_Check's picture

"Why does GOD need a STARSHIP?"

Joe Sixpack's picture

"Here Come Higher Taxes: Goldman On Imminent Tax Increases"


Translation: Fed, we need more bailouts. Squeeze the slaves some more.

Problem Is's picture


And we Goldmanites will announce it so Bennie and Timmay don't have to...

docj's picture

Dang, didn't see that coming. < /sarc >

Shameful's picture

This is downright comical.  Hell why not.  When you have already blown out the economy and are consolidating it under the state why not squeeze the people.  Clearly we are to stupid and lazy to resist.  Where is zombie Thomas Jefferson when you need him?!?!?

crosey's picture

If you look at him with one eye closed....he could be Jefferson.

Vulgus Porkulus's picture

Actually, the Trillion + bank bailout was the first thing to clue me in to higher future taxes, but I guess GS was busy during that one.  Nice to see they woke up and noticed entitlement spending.

Shameful's picture

They might have missed that one for their projections...after all whats a few trillion dollars between friends?

the grateful unemployed's picture

i still don't see how those tax increases are going to close the deficit? the problem being that 20% of the people now have 80% of the money, and you increase their rate of taxation what, a few percent? the system works a lot better when you raise taxes incrementally on a lot of people, (aka the former middle class)

concerning VAT, on top of the already 10% my local constabulary already charges? I'd like to see that

Gordon_Gekko's picture

The intent never was or will be ever to close the deficit, but to rob and pillage the populace as much as they can. CONgress/US Govt. doesn't give two shits about the deficit.

Gordon_Gekko's picture

Let's just call it what it is: SLAVERY. I see people going to cash economy/black markets (free markets is really what they are) - not out of choice (most sheeple don't have enough brains to even contemplate such a thing) but out of necessity.


Rick64's picture

They are unconstitutional and one of the biggest scams they have pulled on the U.S. citizen. Check out all the former IRS agents that say that there is no law supporting income tax on an individual. Don't take my word for it, research it.

Neophiliac's picture

Wow. Just WOW. Glenn Beck much?

16th Amendment reads:

"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

Rick64's picture

I don't watch Glenn Beck. He is an entertainer. The 16th amendment was never ratified by 3/4 of the states as required by law.  Some of the states ratified it against provisions in their state constitutions . Besides not being ratified it is against the constitution itself. A lot of people mistake IRS code and policy as law but it isn't. I would like to hear any argument on this.

John Self's picture

Just for clarification, you mean to say that the Internal Revenue Code is "against the constitution itself," right?  Because if you were saying that the 16th amendment were against the constitution -- well, that's the point of a constitutional amendment.

Rick64's picture

I don't think amendments are supposed to contradict the constitution just modify it. There could be a debate on this either way, but more to the point is that the 16th amendment wasn't ratified by a 3/4 vote. Later some states were coerced into ratifying it against their state laws which in many cases required it to be debated in their legislatures this would null their ratification of it.

Shameful's picture

There is a reason why the IRS is arming up (yeah they need shotguns...) and they are trying to kill cash transactions.  Wait till they try to phase out cash, that will be "fun".

DoChenRollingBearing's picture

When those "fun" days come (no cash), I will be comforted by my gold and my guns.  I suspect millions more of us will be comforted by same.

Yeah, come and get it and see what happens.  Fun indeed.

Shameful's picture

Well the issue we will have is Uncle Sugar will frown on transactions outside of his grid.  Though that's where the guns come in.  Hope it will be millions that are prepared but I suspect the number is far less.

If you don't mind me asking, what keeps you here?  Reading sounds like you do business here but why not bail out and go to Peru for example?  As a young man with few assets I'm eyeing the door, and I assume if I had wealth that Uncle Sugar wanted to steal I would be eyeing the door even more.

DoChenRollingBearing's picture

Re staying vs. going, my wife (Peruvian) and I talk about that from time to time.  Our family business is in Peru, we go twice a year.  We are in our mid 50s.

USA: More and better bookstores, bit less crime, air conditioning, better (for now) legal code, right-wing talk radio, no European visa hassles for my wife since she became a citizen here.

Peru: CHEAP!  Food is good.  Some routine things are hard to get done there though.  The corruption is more blatant, and you cannot get legal redress if you are wronged (eg, the cops won't bust-up that ring of counterfeiters making fake Chinese bearings that pass as our Korean).


A suggestion!  Take some of those few assets and visit another country or two.  Read up on them first.  Try to stay at least a month so that you more or less know how things work (perhaps a "between jobs kind of thing").  Also, before you bail, it is important to note that speaking the local language is a BIG help.

Shameful's picture

Awesome, thanks for the reply.

My plan right now is to save and I'm taking a trip this summer to look at places with my folks for their possible retirement.  My dad is leaning towards staying here or South America and my mom is wanting to see Asia. 

I get a insane amount of vacation so I'm going to try to set up a couple 2-3 weeks trips this year.  Agree on the languages but have not picked a place yet, so working on trying to learn Mandarin in case I pick China or Taiwan.  On the plus side I have an in demand skill-set so that does open some doors.  Seems like most of the places I'm interested in going to would let me in.

DoChenRollingBearing's picture

Well, your plan looks pretty good re checking out some destinations.  Parts of South America (also Costa Rica & Panama) are pretty nice places all things considered.  Casey has a ranch project in NW Argentina that looks good, at least on paper.  Their capital Buenos Aires seemed like a pretty decent place (in the good parts of town only). Uruguay might be worth a look.

Asia I know much less about, having only been to Japan and China just once MANY years ago.  Someone else a few days ago said here at ZH said that Asia can be nice, but you will never really fit in with the locals (with friendliness you CAN fit in in places like Peru).  Hard for me to say.  And Chinese is hard!  Singapore maybe?  English spoken, pretty international oriented, and they crack down on the criminal scum.

You said you have a good skill set.  I think that indeed would be another plus should you choose to leave.

Good luck!  Keep posting!

Shameful's picture

I'm a little leery of Panama because so many American expats on a fixed income.  Rapidly they will not be welcome, pretty sure those retires are not hedged against the dollar.  If they get wiped out, I got to think Americas might not be as welcome. In SA I was looking mainly at Chile and Uruguay.  They looked like the best shot at stability and economic growth. 

One of my dad's friends works for the UN (amazing the people you meet in a pool hall) and has spent a lot of time in Asia.  Had a few conversations with him. Gave me a few pieces of advice, it's true they will never accept me as one of them.  Though he said it never hurt him working in Asia, and spent a long time in Japan before getting hooked up with the UN.  His main advice is, respect their culture, don't speak ill of anyone (particularly their gov) and do not get involved in their internal affairs.  Basically keep my head down and they will treat me alright.

He liked Singapore a lot and it's on my list of places I'm looking at, love the fact they speak English and there is work there.  If I end up going to Asia this summer I will be stopping in Singapore to at least check it out.  My dad's friend said he could also hook me up with a few people he knows on that side of the world if I do end up that way.  And yes learning Mandarin is the most difficult thing I have ever studied.  People who have been honest with me tell me that it will be YEARS before I'm any good at it unless I'm completely submerged in it and even then it will take a long time.

For a blue collar kid I have a lot of educational depth, including get an advanced degree right now.  Also I lucked out that I found work in software development, and like doing it.  From what I can see there is a worldwide shortage of skilled programmers.  Sure there is a lot of guys from India, but not to be mean most of the work I have seen from there is simply terrible.  America still has the best programmers in the world.

DoChenRollingBearing's picture

Well, good luck amigo!  It looks like you are doing your homework.  Very good.  If you are better than India's wannabe programmers, then that is an added plus.

But, don't eliminate the USA too quickly!  After every trip of 3 weeks overseas, I am ALWAYS glad to be back home, what with English, familiar food, my extended family, etc.  Of course I am 54 yrs. old.

Go have fun and education checking those places out!  Take your time...  There is a whole world to choose from.

Gwynplaine's picture
Gwynplaine (not verified) Shameful Mar 25, 2010 5:06 PM

Shameful, haven't you noticed the condition of paper money recently?  You can't even get new, crisp bills from the bank. (Oh, except for dollar bills).  The condition of 50s, 20s, and 10s is atrocious.  This stuff should have been burned and reprinted.

The question is: why hasn't it been reprinted?

My guess is that by 2020 cash will be a thing of the past.  I remember reading somewhere that cash transactions of over 2 or 3 thousand euros are no longer considered legal in Greece.  Ireland is also looking to phase out cash.   How else do you think they can curb the inevitable tidal wave of tax evasion?

Shameful's picture

Have to agree.  Though not sure on 2020. Could happen sooner with a currency crisis.  After all if the dollar explodes they will need new money, and would be a great time to phase in all digital money.  I have a small supply of cash and it's not in the best shape.  The new 5's I got last night look like they have already taken a beating.

Cash is anathema to the taxing and control grid.  Once they can move to digital money they will remove the ability to evade taxes with under the counter transactions (baring direct barter).  As a side bennie for the master class pure digital money will make devaluing a snap.  A little work with a 10 key pad and add endless liquidity.  And if the numbers get to big just kick a digit off every one's account, easy as a key stroke.

Problem Is's picture

" they are trying to kill cash transactions"

A Fed VAT would go along way to steering into a no cash debit/credit only system.

Once the total sales tax between city, county, state and Fed become prohibitive... then that will increase the incentive for higher black market evasion of oppressive sales tax rates.

The sheeple will reduce demand for corporate crap, start buying food local and repair and recycle goods instead of more Walmart and Amazon.

Gold, Silver Blanks and Local Scrip

Watch things like silver blanks to start circulating amongst the sheeple.

The Feds can't stop the underground economy of 50 million people selling and consuming small amounts of pot. They can't quash VAT avoidance tranactions either. The EU has tried and failed.

DoChenRollingBearing's picture


Peru has a kind of VAT.  Lots of people finds ways around it.

Yardfarmer's picture
divide_by_zero's picture

I remember back in the 70s before the Reagan tax cuts much of the economy was based on bartering(organized barter clubs etc to organize services/goods to be traded), it got so bad the IRS was trying to tax it as soon as people started using barter "credits", too much like money. With the move back towards confiscatory tax rates, the economy will go back to that again, tax receipts will plummet. It'll likely be easier to organize with the internet now, maybe even an app for that.