Increasing tax incomes by… cutting tax rates

In Short

To escape the slump of the 1970s and their high tax rates, tax rates were cut since the 1980s.

A Few Details

Historically, high taxes didn’t work well, with an economic slump in the 1970s, and with pollution and misery during the communist experiments with their 100% tax rate. High taxes – with implicit redistribution by governmental administrations – have always hit the wall of incompetent management by administrations redistributing the taxes through regulations and monopolies.

Watchout: Increasing tax rates doesn’t mean that tax incomes will rise! Moreover, going back to high tax rates could hurt low-income households with fewer jobs, as learned from past experiments. Instead, cutting tax rates can increase(!) tax revenues. Cutting tax rates since the 1980s didn’t solve all the problems, but it helped stop the downward spiral of the 1970s.

Higher tax rates and big government could distract from the true solution: reorganize the private economy with a market-friendly solution, with private investments, with competition of the best ideas and best managements, in order to go green faster while funding budgets for defense or for compensations promised at the COP21 to developing countries.

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