Blind Leading the Blind

One of my many hot button issues is the fact that our rulers in DC base all of their decisions on economic predictions made by complete idiots who use static analysis. As Tom Nugent points out in this interesting article, the predictions by the DC static analyzers are almost always so far off when compared to the real life results, that no sane person should believe a thing they say.

He points put the very real analysis (which many people think is a satire) they did about a decade ago, estimating huge windfalls of revenue for the Federal government if the top marginal tax rate were raised to 100%. That study actually predicted higher revenues in each subsequent year, as taxpayers made more money that would be forked over to the IRS.

A more practical dynamic analysis of such a tax rate would reveal that a 100% tax rate would result in very little actual dollars for DC because, unlike the space aliens who populate DC, those of us in the real world would just as soon do something else with our time than work our butts off to make money that we can't keep.

Once again, that is the reason that Federal income tax revenues doubled after Ronald Reagan reduced the top marginal tax rate from 70% to 28%. People will take risks and work harder if they are allowed to keep more of the fruits of their labors. Contrary to the conventional wisdom promulgated by the media, the truth is that the deficit grew in the 1980s solely because Congress went on a wild spending binge, much like they are doing right now.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/25/2002 10:38:00 PM Send this post: