Tax rates affect behavior.

Rand Simberg makes some excellent points about tax rate changes. Democrats seem to assume that changes in tax rates do not affect behavior; any increase in tax rate automatically translates into increased tax payments to the government and, conversely, any reduction leads to reduced taxes.

Furthermore, the language of Democrats in describing any tax rate reduction captures their attitude. Such reductions constitute an "expenditure" by the government. This indicates an "implicit assumption that all wealth, regardless of who actually earned it, is the property of the state, and any amount that we have after taxes is viewed as a gift from the state."

This approach to economics carries grave dangers for the country. Private enterprise and individual initiative create wealth. Government regulation and taxation affect behavior. Why should a person risk their life savings to create a new business only to have government confiscate 90% of their increased income? High marginal tax rates discourage entrepreneurial activity.

High marginal tax rates also lead to inefficiencies as people invest to reduce taxes rather than increase productivity. Such tax policy also encourages unethical contributions to politically powerful to gain favored tax treatment. One of the most effective ways of reducing corruption in Washington would be to enact a simple tax code with low tax rates for all.