Incentives are incentives. If you want more of anything, subsidize it, whether directly, through tax advantages, or by means of favorable terms of regulation. If you want less, than penalize it, for example, by over- regulation (increasing compliance costs), fines or fees, or increased taxation. All things being equal, of course. Thus, if you want fewer affluent people, tax them 50% or more. If you want more investment, get rid of the capital gains tax.
I remember watching C-SPAN when the luxury tax (10%) on yachts was being debated. Proponents suggested that the rich would not care about such a paltry tax, and therefore that it could not hurt the industry, and would produce a pure revenue stream. It was passed, and the yacht industry was devastated, and there was little revenue produced, certainly not enough to offset costs like unemployment insurance. As it happened, it was not only rich people buying yachts, but people affluent enough to buy something, but not rich enough to be indifferent to price.
I remember watching C-SPAN when the restaurant industry testified against the elimination of the business lunch deduction. The Democrats on the committee laughed at the idea that rich firms would cut back significantly because of the elimination of a tax break. It passed, and the restaurant industry was devastated, especially in major cities like New York, and fancier venues, throughing thousands of people out of work....... |
