"Raising Taxes On The Rich Doesn't Push Them To Be Less Productive: Study"
Raising Taxes On The Rich Doesn't Push Them To Be Less Productive: Study
By Jillian Berman at Huffington Post
http://www.huffingtonpost.com/2013/05/15/taxes-on-the-rich_n_3280827.html?ncid=edlinkusaolp00000003
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Raising taxes on the rich doesn't make them less productive -- except when it comes to avoiding taxes, according to a new paper.
The study, by the Economic Policy Institute, a left-leaning research organization, finds the politically popular strategy of broadening the tax base while lowering tax rates may not be the best way to boost revenue. A better way to use the tax code to raise revenue, according to EPI, would be through a combination of raising taxes on income earned through capital gains and adding more tax brackets with higher rates for those upper-upper-income households.
That's because rich households tend to respond to tax increases by shifting their money into categories that are less taxed, such as capital gains. Wealthy people -- for example, Republican presidential candidate Mitt Romney -- are much more likely to benefit from these low tax rates because a larger share of their income can be reclassified as investments, according to the study.
Theres more flexibility for reporting capital gains income, Andrew Fieldhouse a federal budget policy analyst at EPI who authored the paper, explained to The Huffington Post. Most people dont have the option of reclassifying their income from work as tax-preferred investment income.
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