Twice a month, or every other Wednesday, I will be posting a new feature on this blog called “What could go wrong?” in order to illustrate the law of unintended consequences, an iron law that bedevils most, if not all, public policies and reform schemes, no matter how well-intentioned or carefully crafted. (See the NATO example below.) For this installment, I want to highlight President Biden’s proposed tax increases on wealthy taxpayers and on corporations. If history is any guide, however, when we tax the rich to give to the poor we will usually end up with fewer rich and more poor! Specifically, these tax-increase proposals, if enacted, are going to backfire in three possible ways: (i) new investment by the private sector will decline, (ii) fewer new business firms will be started, and (iii) more U.S. companies will just move overseas. Also, a fourth possible result is that fewer taxes will be collected–not more! Don’t say we didn’t warn you!
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