It's not just a problem of earning less and doing less though. Even if a rich person is willing to bear an additional burden, their loss of income implies that in the near future they will have to (1) reduce their consumption expenditures, (2) reduce their investment expenditures, and/or (3) reduce their cash balance.
It's not just a problem of earning less and doing less though. Even if a rich person is willing to bear an additional burden, their loss of income implies that in the near future they will have to (1) reduce their consumption expenditures, (2) reduce their investment expenditures, and/or (3) reduce their cash balance.
Of course, the government and its beneficiaries get to use additional tax revenues to increase their expenditures and cash balances, but the situation isn't symmetrical with respect to investment expenditures. Whenever a government attempts to "invest" in its own production, or in subsidies of private production, it is not being guided by profit-and-loss considerations, and often in the absence of price information altogether. Governmental "investment" lacks any meaningful market test of its fitness for maximizing consumer utility.
A key point that even many mainstream economists fail to grasp is that private thrift doesn't merely supply the financing for investment expenditures, it also furnishes the labor and other factor inputs needed for lengthening the time lag available for transforming inputs into outputs by restraining present consumption, thus enabling producers to take advantage of additional opportunities for boosting factor productivity. It is bad enough that high income tax rates deter private thrift, but the diversion of incomes towards the government consumes whatever savings are available.
Soaking the rich isn't the only source of this problem. Nowadays, printing fiat money and handing it out as entitlements is the more common fiscal procedure, but note that reducing real pre-tax interest rates and promising future old age benefits, etc. also deters thrift, while deficit financing also consumes the available savings. In fact, the empirical data over the past sixty years show that increases in the GDP share of government (which is almost entirely due to increases in Social Security and Medicare) come entirely at the expense of private investment, not at the expense of private consumption. It is the spending (especially spending on entitlements), not the tax rates, that has inhibited growth and reducing capital intensity of the economy (with all its negative consequences for productive sector workers and others not on the fiat money gravy train).
It's not just a problem of earning less and doing less though. Even if a rich person is willing to bear an additional burden, their loss of income implies that in the near future they will have to (1) reduce their consumption expenditures, (2) reduce their investment expenditures, and/or (3) reduce their cash balance.
Of course, the government and its beneficiaries get to use additional tax revenues to increase their expenditures and cash balances, but the situation isn't symmetrical with respect to investment expenditures. Whenever a government attempts to "invest" in its own production, or in subsidies of private production, it is not being guided by profit-and-loss considerations, and often in the absence of price information altogether. Governmental "investment" lacks any meaningful market test of its fitness for maximizing consumer utility.
A key point that even many mainstream economists fail to grasp is that private thrift doesn't merely supply the financing for investment expenditures, it also furnishes the labor and other factor inputs needed for lengthening the time lag available for transforming inputs into outputs by restraining present consumption, thus enabling producers to take advantage of additional opportunities for boosting factor productivity. It is bad enough that high income tax rates deter private thrift, but the diversion of incomes towards the government consumes whatever savings are available.
Soaking the rich isn't the only source of this problem. Nowadays, printing fiat money and handing it out as entitlements is the more common fiscal procedure, but note that reducing real pre-tax interest rates and promising future old age benefits, etc. also deters thrift, while deficit financing also consumes the available savings. In fact, the empirical data over the past sixty years show that increases in the GDP share of government (which is almost entirely due to increases in Social Security and Medicare) come entirely at the expense of private investment, not at the expense of private consumption. It is the spending (especially spending on entitlements), not the tax rates, that has inhibited growth and reducing capital intensity of the economy (with all its negative consequences for productive sector workers and others not on the fiat money gravy train).