Bill Costello

    “THE Goose that Laid the Golden Egg,” a fable by Aesop, provides a moral lesson about greed. A couple owned a goose that laid a golden egg every day. Assuming there must be a big lump of gold inside the goose, the couple killed it. But found no gold. By trying to get all of the gold at once, the couple deprived themselves of gold they would have otherwise received each day. In modern America, the rich are like the goose and the couple is the government.

    To get all it can out of the “rich,” the government uses a progressive federal income tax. The top 1 percent of American wage earners pay 40 percent of the total income taxes collected by the federal government. The top 5 percent pay 60 percent, the top 10 percent pay 70 percent, and the top 50 percent pay 97 percent.

    The burden of taxes has increasingly been shifting to a smaller and smaller percentage of the population. America now has the most progressive income tax system among nations that belong to the Organization for Economic Cooperation and Development. In America, the rich pay a larger share of taxes than in any of those nations and the poor pay a smaller share.

    Who are the so-called rich? For the past two years, they have been defined by an arbitrary annual income of US$250,000 and up.

    But, is annual income a good measure of how rich someone is? If Bill Gates earned zero income this year, would he still be rich? Of course. Because he has accumulated billions over the years.

    Just because a family earns an annual income over US$250,000 does not mean they are rich. It just means they did well during a particular year.

    Income levels vary from year to year. Some people work for decades in the lower brackets until their hard work pays off and they get to enjoy a few years in the upper brackets. Most are not millionaires or billionaires. That these people have to pay extra taxes at the point when their higher incomes compensate them for years of sacrifice is despotic.

    The real millionaires and billionaires are not very concerned about income tax rates because income taxes cannot touch their accumulated wealth. It is protected by tax shelters.

    Despite the facts, the government still typically views the reduction of income tax rates as “tax cuts for the rich” instead of what it really is: tax cuts for the economy. It’s a concept the government repeatedly fails to grasp.

    It has been proven time and again that reducing income tax rates increases tax revenue. When President Calvin Coolidge reduced income tax rates, the government collected more money in taxes. The same thing happened under Presidents John F. Kennedy, Ronald Reagan, and George W. Bush.

    How is it possible that reducing income tax rates increases tax revenue?

    Because when income tax rates are high, many people put their money in tax shelters to avoid paying taxes. People are also less likely to put in extra time at work, hire new employees, or invest in new equipment when they know that most of their additional income will be eaten up by taxes.

    When income tax rates are low, people remove their money from tax shelters to invest in the economy where they can make more money. As a result, more people actually pay taxes, more jobs are created, output increases, incomes rise, and the government collects more money in taxes.

    Like the couple whose short-sighted greed prevented them from maximizing profit from the goose, the government’s short-sighted greed often deprives the nation at large from maximizing tax revenue and improving the economy.

    (The author is the president of U.S.-based Making Minds Matter, LLC.)