Monday, February 04, 2008

High marginal tax rates punish success

A high marginal tax rate system means the more a person makes, the more the government takes. Plenty of evidence shows high marginal tax rates distort peoples' willingness to work hard to improve the quality of life for themselves and their families. Why work harder if the government is just going to take most of it away?

In the US between 1980 and 2005, the highest marginal tax rate halved, and the amount of revenue collected from those paying the highest marginal tax rate doubled. Even here in B.C., marginal tax rates have fallen and the tax take from the highest income earners has increased. All those people with apartments in Alberta no longer have to claim Alberta residency to protect their hard-earned cash. We have a much fairer system here now, but it could be even better.

The evidence is clear - when high marginal tax rates are cut, governments get more money from high income earners. By cutting high marginal tax rates now, the government can make future tax filing a lot easier and help cushion the blow of any upcoming economic slowdown. By encouraging the most entrepreneurial and hardest working people to work harder instead of punishing them, the government can boost its revenues without raising taxes. Let's face it, the last thing we need as we move into a period of slower economic growth is more taxes.

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