“The evidence is clear that when marginal tax rates go up, the amount of reported incomes goes down.”
From a WSJ op-ed describing how the plan to pay for health care reform via taxes on the rich won’t raise nearly as much money as the government thinks. Why? The rich have a long history of avoid tax increases in all sorts of ways. As the Cato Institute’s Alan Reynolds writes:
Successful people are not docile sheep just waiting to be shorn.
For example, here’s a likely scenario:
Investors who jumped into dividend-paying stocks after 2003 when the tax rate fell to 15% would dump many of those shares in favor of tax-free municipal bonds if the dividend tax went up to 23.8% as planned.