The battle over raising federal income tax rates really has heated up. Liberals and conservatives have wheeled out their big guns.WHAM! Four Deformations of the Apocalypse. In the NY Times David Stockman launches an all-out attack on Republicans who love to spend but hate to collect tax dollars. (The notion that President Reagan believed slowing the flow of tax dollars would cause Congress to slow its spending now sounds absurd. Yet that's how many people actually expected responsible legislators to behave in previous generations.)
BAM! The Soak-the-Rich Catch 22. In the WSJ Art Laffer insists that low tax rates are essential for people at the top of the income ladder in order to coax them to pay more into the U.S. Treasury.
Regardless of who wins the immediate battle, many sober observers expect more Americans (only half now pay any federal income tax to speak of) will be required to pay taxes until it hurts.
If tax rates rise significantly in top brackets, so will demand for tax shelter. Could that be why Uncle Sam has been so diligent going after funds sheltered in Swiss accounts and elsewhere? Preemptive strikes, if you will?
You only have to look at the case of the Wyly brothers to see how difficult a crackdown on intricate tax dodges can be. (If you're merely "deferring" taxes in your offshore trusts, who's to say you can't keep on deferring?) Although the IRS has been after the Wylys for years, only the SEC seems able to bring charges.
If tax shelters were ETFs, I'd be bullish.
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It seems that Democrats have turned Reaganism on its head. Rather than "starving the beast" they have spent first, building up so overwhelming a debt and deficit as make higher taxes an inevitability.
The curious thing is, they don't seem to care about economic growth. Yes, they give it lip service all the time, but every action they take only stifles growth further.
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