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Higher Taxes Will Not Increase Revenue Flow

Posted by Heather Edwards on October 6, 2010

Donald Trump, in a conversation with John Stossel about how the rich will respond to higher tax on their income, frankly acknowledged that they will simply leave the country to avoid paying out more of their earnings.

“I know these people.  They’re international people.  Whether they live here or live in a place like Switzerland doesn’t really matter to them.”  He continued, “I haven’t left yet…Look, the rich people are going to leave.   And other people are going to leave.   You’re going to end up with lots of people that don’t produce.  And then that’s the spiral.  That’s the end.”

Stossel argues that it’s already happening in places like Maryland and New York, where high earners have left the state, and Governor David Patterson confirmed that increased income taxes have resulted in far less than the projected $4 billion it was supposed to bring in.  The bottom line: higher taxes do not typically yield increased revenue.

Art Laffer, famous for the Laffer Curve, is not surprised:

“It’s just economics,” [Laffer] says.  “People don’t work to pay taxes.  People work to get what they can after tax.  They’ll change where they earn their income.  They’ll change how they earn their income.  They’ll change how much they earn, when they receive the income.  They’ll change all of those things, to minimize taxes.”

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