To: GraceZ who wrote (107981 ) 6/11/2001 8:01:44 AM From: flatsville Read Replies (2) | Respond to >>>Confiscatory taxes tend to reduce economic activity simply because they provide a disincentive to create income as well as encourage the creation of tax shelters. The idea that you can get the rich to share a bigger burden than they already do by raising marginal rates or keeping them high tends to backfire. Simply because when the tax rates are high the rich tend to structure their money making ventures to avoid taxes. When the marginal rates are lower they simply pay the tax because it isn't worth it to them to go through the shenanigans of sheltering income.<<< The effect of loopholes is to narrow the tax base, which means that there is less income to tax. As documented in chapter 1, the federal government counted 50 tax expenditure items in 1967 that cost the IRS an estimated $37 billion in uncollected taxes. By 1981, the number of tax expenditures had grown to 104, with an estimated loss of $229 billion, a total that more than doubled to over $500 billion in foregone revenues in 1986. By 1989 the figure had fallen to about $400 billion, but by 1993 it again surpassed $500 billion. The effect of all these loopholes, demanded and obtained by special-interest groups, is that the tax base is in the neighborhood of half the GDP.<<<
