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Guest Post: Have Tax Revenues Topped Out?

Tyler Durden's picture





 

Submitted by Charles Hugh Smith from Of Two Minds

Have Tax Revenues Topped Out?

Efforts to collect more taxes fail because people adjust their behavior accordingly.

Amidst all the "fiscal cliff" talk of raising tax rates, few dare to ask: have tax revenues topped out?

How could tax revenues decline as rates go up? Easy: people modify their behavior in response to whatever incentives and disincentives are present.

Make mortgage interest deductible and people will rack up huge mortgages. Reduce the yield on savings to near-zero (thank you, Federal Reserve) and people will save less.

Raise tax rates and people will lower their income or move to low-tax locales. As the saying has it, "Money goes where it is treated well."

Supporters of higher rates tout studies that find upper-income taxpayers shrug off higher rates, staying put in high-tax states: Do High Taxes Chase Out The Rich? and Superrich stay put in high-tax states like California.

On the other side of the ledger is this study from Britain: Two-thirds of millionaires left Britain to avoid 50% tax rate.

Which view is correct? Both, as a result of different dynamics. There are at least four separate dynamics in play.

1. The professional class is often "captured" and cannot move. For tax purposes, households with incomes of $500,000 and up are considered wealthy, i.e. above middle class incomes. Many of these people are self-employed or professional such as doctors and attorneys.

In theory, they could move to lower-tax states or nations, but their practice or enterprise is often local--pulling up stakes would mean sacrificing their high income which is the result of years or decades of networking and building local social capital.

Many of these high-earners are also trapped by their demographics: their kids are relying on their high incomes to pay their college costs, and aging parents may rely on their proximity and income.

Moving away is simply not an option for these high earners. So it's not that these professionals approve of higher taxes, they just don't have any practical alternative.

2. What self-employed high earners can do is lower their earnings. If the threshold is $250,000 each, then they will lower their taxable income to $245,000. Those with S corporations, limited liability corporations, etc. have legal ways to lower their taxable income while retaining the benefits of their entity's income.

For example, maybe the corporation will buy a live/work loft as an office, eliminating the owner's personal mortgage. The corporation effectively pays the mortgage, meaning their earned income can drop significantly.

Others will choose to work less. Why work so hard just to pay more taxes? Refuse work, cut your hours, enjoy life more.

3. The super-wealthy have the means to transfer income and wealth to lower-tax nations and pursue legal loopholes in the U.S. tax code. Those households making a mere $500,000 rarely have the financial wealth or firepower to justify the costs of hiring big-bucks tax attorneys and moving their assets and operations overseas.

This is the primary difference between high earners and the truly wealthy: the merely well-paid have fewer incentives to establish a legal enterprise overseas and deal with the complexities of the U.S. tax code, which considers all income from all sources to be taxable U.S. income.

For example, a wealthy U.S. citizen may earn $10 million a year, but by buying a villa and establishing a corporation in a low-tax nation, they can legally lower their tax rate on income earned or declared in the low-tax nation. By expensing all sorts of things against their U.S. income, they can effectively pay the U.S. rate on a small portion of their earnings while sheltering 90% overseas in perfectly legitimate ways.

Shifting assets and income streams to shelter income is de rigeur. The wealthy have more opportunities to do so, and so it is unsurprising that they would take those opportunities.

The wealthy and corporations are used to juggling tax code complexities and international assets/declared income; they have to do this to maximize shareholder value. Jacking up rates basically impacts the "captured" professionals and small business owners who have large earned incomes.

At some point many of these people will decide to sell out, retire, or drastically trim their enterprise to avoid working hard just to pay more taxes.

4. These basic avoidance strategies--earning less money and moving income and assets to lower-tax nations--are already common and relatively easy for those with control of their incomes and assets. Tax avoidance is universal, which is why tax increases always raise less money than linear projections anticipate.

If the sales tax or VAT goes up, people buy less retail and buy more on the cash-black market. The wealthy are simply doing the same thing on a larger scale.

Those with an interest in technical analysis may discern a topping pattern in this chart of tax receipts. It looks like the resurgent tax receipts of the QE/stimulus era will top out and roll over as the global recession deepens in 2013, forming a lower high.

We can anticipate a stairstep down pattern as tax receipts decline, new tax increases bump up revenues for a brief time and then people respond with more tax avoidance and tax revenues will resume their decline.

Various studies have found that Federal tax revenues top out just above 20% of total household income, regardless of the era or nominal tax rates. Recall that in many high-tax economies, up to 50% of the economic activity occurs in the informal/black market.

When tax rates are high, people move their consumption and enterprise into the cash informal economy and only pay taxes on half their total income. This is one way that people limit the amount of taxes they pay to around 20%, regardless of the nominal tax rate.

Efforts to collect more taxes fail because people adjust their behavior accordingly. Linear projections of rising tax revenues always fail to account for this easily predictable behavioral response.

I have addressed these issues many times:

Will "Tax the Rich" Solve Our Deficit/Spending Crisis? (December 28, 2011)

The Future of America Is Japan: Runaway Deficits, Runaway Debts (October 15, 2012)

About Raising Taxes as the "Solution" to the Fiscal Cliff.... (October 26, 2012)

The Fiscal Cliff and the Grand Bargain (November 28, 2012)

 


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Tue, 12/04/2012 - 14:11 | Link to Comment knukles
knukles's picture

What income to tax?

Oh, you mean my residual already been taxed unreal non-disposable income before being taxed again.
Gotcha....

Tue, 12/04/2012 - 14:20 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Retiring looks better all the time...

Tue, 12/04/2012 - 14:26 | Link to Comment icanhasbailout
icanhasbailout's picture

on ZIRP, or even NIRP? Hope you don't plan to live too long.

Tue, 12/04/2012 - 14:35 | Link to Comment NotApplicable
NotApplicable's picture

Or maybe "retiring" from the phony economy to participate in the black one.

Looking poor is going to be a booming business.

Tue, 12/04/2012 - 14:49 | Link to Comment seek
seek's picture

I just said the same on an earlier story.

I think the key to "retirement" is moving towards maximum self-sufficiency -- growing your own food, solar electric, owning older used vehicles you repair yourself, bartering or buying direct from other with case, and living on property in low-tax jurisdictions or simply becoming the next-generation of "Okie" in RVs.

The bright side is that not only does this preserve one's retirement savings, it helps starve the beast as well.

Tue, 12/04/2012 - 16:06 | Link to Comment CH1
CH1's picture

Once you drop out of the game, the wonderful surprise is that your time becomes your own again. No more endless forms to fill out, worrying that they weren't filled out correctly, and all the other non-monetary BS that is shoved down your throat in the system.

Tue, 12/04/2012 - 16:57 | Link to Comment odatruf
odatruf's picture

PC load letter? What the fuck does that mean?

Tue, 12/04/2012 - 21:25 | Link to Comment CH1
CH1's picture

No idea WTF you're talking about.

Tue, 12/04/2012 - 14:31 | Link to Comment knukles
knukles's picture

Which, the moment you or I declare retirement, they'll cut SS to zero for anybody who passes a means test comprised of having a pulse and breathing, will "Nationalize" all 401(k)s, IRAs and pension funds to "Liberate" citizenry monies thereby Freeing it for "Social Investing" it in "Productive Assets" (like EBT cards and shit) for the "Benefit of the People" in Treasury backed (re-hypothecation, much) "Government Annuities."

But never fear, they'll be in segregated, allocated accounts.
Right next to Ft. Knox's gold.

Tue, 12/04/2012 - 14:36 | Link to Comment kaiserhoff
kaiserhoff's picture

As long as there's one raggedy assed poor person in Africa, you are way too filthy rich, Knuckles.  -

                                                                            Rufus, the Redistributor

Tue, 12/04/2012 - 14:48 | Link to Comment knukles
knukles's picture

Ah, as a matter of fact, some of my uber-liberal Kalifornia People's Republik golf buds were talking about the "threshold" for higher taxes. 
They told me the rich should pay more.
Even suggested 90% marginal rate over the "threshold"
They also fervently believe that Everything should be approached and implemented on a Global Basis

I pointed out to them that the top 1% on a global basis was a cutoff of approximately $US 25,000 and thus....

<crickets chirping>

Then I told 'em to pay up on the skins I won...

 

Ah, Math, the New Inconvenient Truthtm

Tue, 12/04/2012 - 15:27 | Link to Comment BraveSirRobin
BraveSirRobin's picture

Why do you hang-out with morons?

Tue, 12/04/2012 - 16:37 | Link to Comment kaiserhoff
kaiserhoff's picture

Because he lives in California?

Tue, 12/04/2012 - 14:36 | Link to Comment NotApplicable
NotApplicable's picture

With Corzine being the nation's Retirement Czar.

Tue, 12/04/2012 - 21:42 | Link to Comment August
August's picture

"...they'll ..."Nationalize" all 401(k)s, IRAs and pension funds to "Liberate" citizenry monies thereby Freeing it for "Social Investing" it in "Productive Assets....

Just for the record, I strongly suggest that 401(k)s, IRAs etc. be closed out.  I've been disributing plan assets for three years now, and the last of my once-hefty retirement plan gets zeroed out in January. FWIW all proceeds have been (legimately) moved and invested overseas, but that's a whole 'nother kettle of fish.

I'll never make USD200,000 again, and am glad of it.  Starve the beast.

Tue, 12/04/2012 - 14:39 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

Yes DoChen, and thats the problem.  Yesterday on CNBS they were talking about how there are 5.1 millionaires in the US.  Thats almost 2% of the population right there.  So, I am thinking to myself, how is a couple making $250k in the top 2%?  Its because older people have already made their fortune, under a more beneficial tax structure, and when inflation was lower.  They can afford to lower their "income" below the highest limits and still retain their wealth.  Meanwhile, they are consuming more and more healthcare and social security and they want the young to pay for it.  And they got to do it all when the retirement age was 65.

Couples making $250K/year will be lucky to be millionaires unless they live in modest homes and live modest lives.  Higher taxes and inflation will consume their earning power.  So basically, Obama wants to tax the young to fund the old.  Now they want to raise taxes on Social Security and Medicare and younger people have to work longer just to start taking less income out of the system.  People in their 40's and younger will have to work a full 5 years more just to collect, and the retirement age could easily be raised again between now and then. 

Work till you die will be the motto of the future.  All the dupes voting for Hope and Change will someday find out the hard way that the joke is on them.

Tue, 12/04/2012 - 14:43 | Link to Comment knukles
knukles's picture

FUCKING BAIT AND SWITCH

All this fairness horseshit promulgated without any principles.
I can understand saying the 2% should pay more (or some other proposition, debatable, whatever) but then dropping the cutoff to $200K is HORSESHIT

First, how the fuck does one automatically get from a "millionaire" net worth to income threshold of $200K?  Hmmmm?

Second, while $200K might be a Big Fucking Deal in the Ozarks, it's not very much in NYC, LA, SF...etc.

HORSESHIT
HORSESHIT
HORSESHIT
HORSESHIT
HORSESHIT

 

Fucking Evil

 

(I greened ya' Scotty)

 

 

Tue, 12/04/2012 - 14:50 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

Thanks Knuckles.  Taxing income is a load of shit you are right.  The people who have most of the wealth already are paying way less, even in the face of ZIRP or NIRP.  Dividend income is only 15%.  Thats why people like Romney pay alot less in terms of % of their income than the people making $250K/year.  And when the Bush tax cuts were enacted on people making $250K/year, you would now have to earn $325k/year just to keep the same purchasing power after inflation as those people who were making that amount in 2000.

Tue, 12/04/2012 - 16:50 | Link to Comment chubbar
chubbar's picture
Are any of you fellows ever going to get around to talking about spending? Do you fucking think we are in this mess because we all paid too little in taxes, even the 250K folks? Christ, they've suckered you right into the envy mode and away from the sanity of understanding the game they are playing on you. It's the SPENDING! PERIOD! You can tax 100% of every dollar over 250K and it won't fix the fucking problem. Wake up!
Tue, 12/04/2012 - 17:11 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

We all know that.  Thats why I oppose any tax increase at all.  It won't be used to reduce the deficit, just to increase spending.  Spending never EVER goes down.  The best you might get is a reduction in the rate of spending increase but thats about it.

Im so sick of people talking about compromise too.  We have compromised our way to over 16 trillion in debt and climbing fast.  Its like compromising with your spouse who has a gambling addiction.  Honey, I'll sign up for another credit card with you if you only blow $1000 a day instead of $1100 a day.  Thats the kind of compromise that leads to being stone cold broke.

Tue, 12/04/2012 - 17:30 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

the truth is we need much smaller gov, much less intrusive, any incr in money to the fed gov for any so called use I am against..shrink the fucking monster in DC..and The EU.

Tue, 12/04/2012 - 14:57 | Link to Comment Winston Churchill
Winston Churchill's picture

UK is raising retirement age for both sexes to 70( from 60 & 65).

Still doesn't bend the cost  curve enough, so expect a further raise after the frogs get

used to the heating  water.

Retirement will return to being a phantasy for most,a temporary aberration in history.

Tue, 12/04/2012 - 15:31 | Link to Comment BraveSirRobin
BraveSirRobin's picture

And this, despite the British food and national health care system. Those Brits are one hardy race.

Tue, 12/04/2012 - 14:43 | Link to Comment max2205
max2205's picture

Starve the beast

Tue, 12/04/2012 - 15:04 | Link to Comment lasvegaspersona
lasvegaspersona's picture

The Beast connot be starve when the Fed feeds it whatever it needs. Until the Fed and the dollar go bye bye the Beast will be fine.

Wed, 12/05/2012 - 08:46 | Link to Comment Urban Redneck
Urban Redneck's picture

Starving the beast increases the borrowing as a percentage of public spending.  They can screw with the statistics easily, but it is harder to manipulate a ratio that is based off two absolute numbers.

Tue, 12/04/2012 - 15:12 | Link to Comment azzhatter
azzhatter's picture

I did it. I went from paying $97,000 in income tax in 2010 to paying zero last year. I went from $317,000 income to $27,000. I have substantial savings and buy a lot of metals and do as I please. I will not be a slave to government, they can suck on me. I refuse to feed the beast. I have no desire to fund the socialist dreams of the elites. They can all suck on me. And Fuck You Bernanke

Tue, 12/04/2012 - 15:33 | Link to Comment BraveSirRobin
BraveSirRobin's picture

You have lots of metals and subtantial saving to live off of, eh? Hmmmm. They will get you one way or another. Like a truffle, the pig will sniff you out.

Tue, 12/04/2012 - 15:38 | Link to Comment JLee2027
JLee2027's picture

God bless you and your courage.

Tue, 12/04/2012 - 14:12 | Link to Comment tooriskytoinvest
tooriskytoinvest's picture

Trader Alert: The Market Could Now Be Entering A “Euphoria Stage”. Major Investment “KABOOM” Coming.

http://investmentwatchblog.com/trader-alert-the-market-could-now-be-entering-a-euphoria-stage-major-investment-kaboom-coming/

Tue, 12/04/2012 - 14:17 | Link to Comment Mike in GA
Mike in GA's picture

Obama is the "Majick Negro", remember.  Regular laws don't apply to him or 'Dem progressives'.

When the One speaks, revenues flow from the 'Rich'. 

Tue, 12/04/2012 - 14:34 | Link to Comment knukles
knukles's picture

"laws don't apply to him or 'Dem progressives"

Truth, that be the truth, my brother
(if there's any truth left...)

Tue, 12/04/2012 - 15:13 | Link to Comment azzhatter
azzhatter's picture

They wish to pretend they are enlightened

Tue, 12/04/2012 - 19:21 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

+1

Tue, 12/04/2012 - 14:22 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Maryland initiated a Millionaire tax and all of the Millionaire's left.

Tue, 12/04/2012 - 14:30 | Link to Comment LawsofPhysics
LawsofPhysics's picture

The entire fucking planet is printing. We will all be millionaires soon.  The taxes in other countries may be less, but the bribes and personal security is a bit more expensive.  Hey, at least these folks have the freedom to leave (for now), so let them.

Tue, 12/04/2012 - 14:22 | Link to Comment Kreditanstalt
Kreditanstalt's picture

W-E-I-R-D stuff.

Why is gold (the "gold price" at least...) falling, even with the dollar sliding, terrible data, re-revolutions in the middle east, bearish news and so on?

 

Tue, 12/04/2012 - 14:31 | Link to Comment Long-John-Silver
Long-John-Silver's picture

When Paper Gold is valued the same as Physical Gold it's easy to create the current situation. One day soon people will realize that Paper does not equal Physical value and the run on the Bullion Banks will start in earnest. Rumblings have started already with several Sovereigns demanding repatration of their Physical Gold.

Tue, 12/04/2012 - 14:43 | Link to Comment Bastiat
Bastiat's picture

I thought "soon" was a couple years ago . . .but I'm still in.

Tue, 12/04/2012 - 16:34 | Link to Comment Missiondweller
Missiondweller's picture

Sure is hard to tax gold if they (the IRS) doesn't know you have it. An enduring gift from Ronald Reagan (who legalized owning gold).

Tue, 12/04/2012 - 16:44 | Link to Comment akak
akak's picture

Actually, it was Gerald Ford who signed the bill relegalizing gold (bullion) ownership in the USA, in December of 1974.

Tue, 12/04/2012 - 14:31 | Link to Comment insanelysane
insanelysane's picture

Because the market is broken; manipulated; rigged; 

Tue, 12/04/2012 - 14:22 | Link to Comment The Alarmist
The Alarmist's picture

Reminds me of the old joke that the Germans laugh at the Italians for having such high tax rates and Italians laugh at the Germans for actually paying such high taxes.

Tue, 12/04/2012 - 15:17 | Link to Comment Poetic injustice
Poetic injustice's picture

And Greeks borrow from both of them and next day declare bankruptcy.

Tue, 12/04/2012 - 16:35 | Link to Comment Missiondweller
Missiondweller's picture

Bankruptcy? No, no, they just threaten bankruptcy when they need more money.

Tue, 12/04/2012 - 14:23 | Link to Comment Long-John-Silver
Long-John-Silver's picture

In Obama land "fairness" is more important than revenue. 

Tue, 12/04/2012 - 14:36 | Link to Comment knukles
knukles's picture

I've not come up with any homilies off of that, but sure is promising...

 

I ObamaLand "fairness" is more important that { insert your choice here }

Wed, 12/05/2012 - 08:52 | Link to Comment Urban Redneck
Urban Redneck's picture

Fairness is fleecing the sheeple for their stupidity.  There is an odd karmic balance there.

(unfortunately the retribution won't extend to greedy and envious kleptocrats who have already succeeded in fleecing the sheeple)

Tue, 12/04/2012 - 14:26 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Many are talking about moving to Mexico.  Using their health care for $250. a month.  Lower cost of living.  Property Taxes are something like $26. a year.  Plus, you can afford Maids, Gardners, etc.

Funny.  Everyone in Mexico is comming here and so many here are going to Mexico.

Tue, 12/04/2012 - 14:35 | Link to Comment Kreditanstalt
Kreditanstalt's picture

No kidding.  We keep paying our Taiwan medical insurance even as I am forced to live here in Canada.  The Taiwan system is cheaper, they have more modern equipment, more doctors (all walk-in), tests can be done in days instead of weeks (or months), covers DENTAL CARE, and no waiting!  

And Canada's system?  I managed to get classified as "low inome" so pay peanuts: MILK IT DRY!  But why use this system?  Doctors here "aren't accepting any more patients": the official line is "go to an emergency room if you need to see one"...LOL

So Mexico may in fact be BETTER and CHEAPER.                   

Tue, 12/04/2012 - 14:27 | Link to Comment No Euros please...
No Euros please we&#039;re British's picture

Fuck me, if I was a 50% taxpayer I would move too, why stay in this crummy wannabe 3rd world country? Leave the other 50% taxpayers, to their 30 hours weeks and their gold plated inflation linked pensions, working for the government.

Tue, 12/04/2012 - 14:36 | Link to Comment yogibear
yogibear's picture

Eventually the US dollar will be crap. So many reason to leave if you have wealth.

It's a matter of time before the government consficating savings and retirement.  Get out while the going is good.

Tue, 12/04/2012 - 14:40 | Link to Comment insanelysane
insanelysane's picture

My wife and I have BS degrees in Engineering and Science respectively.  We have professional jobs and make about the same money per year.  At a 50% tax rate, 100% of one spouse's labor is being taken by the government.  I believe the definition of slavery is someone who works entirely for someone else.  Ironic since the 1st African American president is looking to enslave a portion of the population.

As for my wife and I, one of us is leaving the workforce next year.  It just isn't worth one of us getting up everyday to run the rat race and get absolutely nothing from it.

Tue, 12/04/2012 - 14:47 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Taxation is reverse Slavery.  They take Money from those who work for a living and give it to those that do not to work for a living.

Tue, 12/04/2012 - 15:35 | Link to Comment BraveSirRobin
BraveSirRobin's picture

That's not reverse slavery, it's good ol' fashion slavery. That's why the slave owners have slaves, so they do not have to do the work themselves.

Tue, 12/04/2012 - 14:48 | Link to Comment ExpendableOne
ExpendableOne's picture

The ultimate "strip" poker game.  Loser gets dressed and goes to work!  

 

Tue, 12/04/2012 - 14:55 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

And to top it all off, after they take 50% of your earnings over your lifetime, they want to tax whats left at 50% with inheritance taxes.  So 75% of what you earned in your lifetime goes to the government.  And thats probably a conservative number.  Why work 10 days to give 7.5 days of it to the government?

Slavery is exactly what it is.

Tue, 12/04/2012 - 15:09 | Link to Comment kaiserhoff
kaiserhoff's picture

Good summary.  Similar decisions are being made all over the country right now.

That's the real fucking cliff, and we're going over.

Tue, 12/04/2012 - 15:15 | Link to Comment azzhatter
azzhatter's picture

Do it, I did and the feeling is very good. You will find a lot of stuff you buy isn't necessary or fulfilling.

Tue, 12/04/2012 - 18:24 | Link to Comment GubbermintWorker
GubbermintWorker's picture

I'm still buying gold and silver and find it very satisfying. Will cash out what is left of our IRA before January 1st and buy some more.

Tue, 12/04/2012 - 17:50 | Link to Comment prodigious_idea
prodigious_idea's picture

From the math you used in the decision for one of you to quit your job, one of you should have gotten a finance degree.

Tue, 12/04/2012 - 18:55 | Link to Comment tango
tango's picture

Insanelysane - same situation.  We'd worked hard and were consultants but as the income grew, the deductions dropped, taxes soared and finally I retired 12 years early.  Since then we've started growing food, preparing to go solar, stocking up supplies prudently for that inevitable rainy day and enjoying life.  Things are different.  When you pay over $100,000 in taxes and your Prez denounces you daily, you sort of lose that drive. 

Tue, 12/04/2012 - 22:33 | Link to Comment Chuck Walla
Chuck Walla's picture

Ironic since the 1st African American president is looking to enslave a portion of the population.

No, he is trying to enslave all of it.  Thats why he wants higher taxes. Not caring about revenue, any idiot knows lowering rates raises revenue. But without means, we are at their mercy.

 

FORWARD SOVIET!

Tue, 12/04/2012 - 14:35 | Link to Comment q99x2
q99x2's picture

My corporations always lose money but if they ever made money I'd be sure to pay taxes. I think some government is getting taxes on gasoline and various other money from the businesses.

Tue, 12/04/2012 - 14:41 | Link to Comment max2205
max2205's picture

There are a lot of stupid people with money, but the smart ones always minimize tax bite. It's easy and then you have time to continue to create wealth.

Govt plays to the stupid fuckers

Tue, 12/04/2012 - 14:43 | Link to Comment JustPrintMoreDuh
JustPrintMoreDuh's picture

If the govt needs more revenue ... why not just print it?

 

BWAHAHAHAHAHAHAHA 

Tue, 12/04/2012 - 15:37 | Link to Comment BraveSirRobin
BraveSirRobin's picture

Yeah, why not, indeed?

Tue, 12/04/2012 - 14:45 | Link to Comment proLiberty
proLiberty's picture

See the Cato video on the Rahn Curve, which explains why revenues have topped out.

http://www.youtube.com/watch?v=uj6lRFXC5rA

 

Tue, 12/04/2012 - 14:50 | Link to Comment Diplodicus Rex
Diplodicus Rex's picture

On the other side of the ledger is this study from Britain: Two-thirds of millionaires left Britain to avoid 50% tax rate.

Which view is correct?

As is the norm with the MSM, the headline is misleading. The truth is to be found in the following statement buried further down the article form the headline:

"It is believed that rich Britons moved abroad OR took steps to avoid paying the new levy by reducing their taxable incomes."

Now the second part of that statement is where the taxable money went. The millionaires registered a Fiduciary Trust in Belize with the Trust's bank account opened local to them in the UK. They then transferred all of their wealth to the Trust which itself is not eligible for taxation. Any money taken out of the trust for living expenses comes out as a loan so that you are forever in debt to your own trust. All of your income is transferred to the trust which means it is not eligible for tax. When you die the control of your trust passes to your children but because no assets were transferred no death duties or inheritance tax is due.Since you are in debt to your own trust the Trust gets first call on any assets accruing from your death, like Life Insurance payouts etc.

The millionaires stayed where they were. They never left the country. Their money is now held in Trust and cannot be attacked by Osborne. I know becuse I just did it.

Tue, 12/04/2012 - 14:53 | Link to Comment JustPrintMoreDuh
JustPrintMoreDuh's picture

Own nothing.  Control everything.

Tue, 12/04/2012 - 14:56 | Link to Comment Diplodicus Rex
Diplodicus Rex's picture

eggsatly

Tue, 12/04/2012 - 15:31 | Link to Comment Jack Sheet
Jack Sheet's picture

Diprex
Great point. This is what Lindsey Williams was referring to in his "secrets of the elite" - none of them "own" anything taxable, not even the coat on their back, not their car or real estate, not anything..

Tue, 12/04/2012 - 14:56 | Link to Comment HurricaneSeason
HurricaneSeason's picture

If tax revenues go down, they certainly will, it'll be because of millions getting laid off. Cutting trillions from the GDP and sending tax rates skyrocketing to 50% or more will cause many people to lose their job. Using the metric system, that'll probably mean $100 billion more a year in tax revenues due to rate increases and a 2% rate increase for some.

Many more people will have their jobs sent to china for $200-$500 a month laborers as a way for the corporations and higher income people to fight back and not worry about workman's comp and social security and healthcare and unions and epa and you can fire them if they are late one day. Actually, they were going to do this anyway. China wants to add 25 million jobs a year and some will come form here. The tax revenue should be a net loss and it was going to be a net loss year on year anyway, just bigger. On top of that, there will be a global slowdown.

Tue, 12/04/2012 - 22:56 | Link to Comment Chuck Walla
Chuck Walla's picture

 be because of millions getting laid off. 

More Obama voters!! WIN-WIN!

FORWARD SOVIET! One Party for All.

Tue, 12/04/2012 - 14:56 | Link to Comment Diplodicus Rex
Diplodicus Rex's picture

I heard Osborne on the radio yesterday. The topic was the recent bashing of corporations for not paying enough corporation tax. He said that they will not stop until these immoral companies paid more tax because that tax was needed to help pay off the DEFICIT. Now that clown on national radio just demonstrated with no ambiguity whatsoever that he doesn't understand the difference between Debt and Deficit. What chance have you got?

Tue, 12/04/2012 - 15:10 | Link to Comment HurricaneSeason
HurricaneSeason's picture

There's no chance of ever paying off the debt. Even the 16 tillion dollar number they use is unpayable unless the dollar approaches zero in value.  The deficit is the only thing they can lower. Soon, the challenge would be to pay just the interest on the debt. When we write bad checks of $1300 Billion a year, it's easy to pay $300 billion in interest at 1% or 2%.  I had a computer tech guy that owned a shop with a sign that said "$25 for returned checks". I asked him if I should include that in the total price of the check I was writing. He got madder than hell. I was glad his work was already done.

 

Tue, 12/04/2012 - 22:59 | Link to Comment Chuck Walla
Chuck Walla's picture

corporations for not paying enough corporation tax

Jeebus, what kind of moron still believes corporations pay taxes?  They accumulate taxes for the government while the people have no idea they are the chumps paying all the taxes.

 

FORWARD SOVIET!

Tue, 12/04/2012 - 15:46 | Link to Comment ebworthen
ebworthen's picture

If you don't think going off the gold standard in 1972 caused dollar devaluation just look at the revenue chart.

Sure, they took in more money, but in increasingly devalued dollars.

Looking at that chart it is hard to believe we are $16 Trillion in debt; what with all that money they've been getting.

What a ramp from 1972 onward, wow.

Debasement?

Spending?

Bailouts?

Waste?

Yup.

Tue, 12/04/2012 - 16:03 | Link to Comment midtowng
midtowng's picture

"a mere $500,000"?

 What world does the person who wrote this article live in?

Wed, 12/05/2012 - 05:37 | Link to Comment cynicalskeptic
cynicalskeptic's picture

That puts you in the upper middle class outside NYC (and LA or SF too I expect).   You can pay your bills and even put kids through college but you're not putting a ton away in savings beyond the usual 401K - which is still a lot less than you'd have gotten in a traditional pension.   My brother down south bought a NEW house on 4 times the land for what my downpayment was (back when you needed 20%).  He has new cars (and a few 'collectibles' as well.  His taxes are nothing and colst of living is FAR lower.  He has a better lifesyle with 1/3 of our income.

A house that cost right on the median for the county 20 years ago has seen its taxes more than triple (now over $30,000 - far more than the mortgage). I don't care how much my house is worth - that measn nothign if I'm not selling it (and much of that increased value is simply inflation - though it is still considered to be a capital gain).

Around here $200,000 a year means you're living a middle class life - getting by, taxed to the max while paying a high cost of living. We are NOT talking 'life of luxury' by any means.  That doesn't change much if you move farther out - you pay more in commuting and rack up longer commuting times.   But this is where the jobs are for a lot of people.  Can't 'move' somewhere chaeper because there aren't any jobs.   The 'Holy Grail' is a NY or CA salary somewhere else but pdds are you're going to be replaced with someone cheaper at the earliest opportunity.   AMT is killing lots of people as well - never was indexed to inflation - another way to screw you.  You lost income averaging so a good year means you pay the max on any one time bonus.  Your income means no finnacial aid for college as well - you pay out of pocket or borrow.

It's really a high end form of indentured servitude - you work 60 hours a week (or more), are often on call 24/7, rarely get to take your vacation, all in exchange for a six figure salary.  BUT you'd better try and save all you can (not that it's all that easy) because odds are you're going to get laid off at 50 and won;t find anything compparable again.

Tue, 12/04/2012 - 16:03 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Obama Care will hurt.  So many employers that will not hire anyone over 30 hours a week to avoid Health Care costs.

Many people will only be able to work 29 hours a week, which will lower tax collected.

Tue, 12/04/2012 - 18:26 | Link to Comment GubbermintWorker
GubbermintWorker's picture

I'd like who ever junked you explain where you are off on that assesment.

Tue, 12/04/2012 - 19:43 | Link to Comment forwardho
forwardho's picture

What? You think the algo-bots only haunt the markets?

Tue, 12/04/2012 - 23:04 | Link to Comment Chuck Walla
Chuck Walla's picture

Obama Care will hurt.

Once again, no!  It creates ever more dependents.  People who need someone else to take of them creating a claim on someone else's paycheck.

 If you can't understand why our clean, fresh, articulate Kenyan Moon Cricket does indecipherable things, then consider who gets hurt. And what that will mean to the damaged party. Every answer makes another dependency and potential debt slave.  Seen in this light, his every move makes sense, for him...

 

FORWARD SOVIET! 

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