Originally Posted by loquitur

No, dippin, they weren't. Federal income taxes consistently have come in at a rate of between about 18.5 and 21.5% of GDP, and have been for years. And they have stayed there no matter what the rates were. (Ace posted the graph on this a while ago, but it's no big secret.) People who can figure out ways to save taxes do so. My tax partner would be out of business otherwise. You'd be amazed at the things people do (legally) to avoid being taxed. They defer income, they lock up funds in illiquid investments, they invest in cockeyed schemes, they hold assets that economically they should sell, etc etc etc. The tax system is massively distortive, and if you think raising rates cures the distortion you're sadly mistaken.

What we do know about capital gains taxes is that cutting them tends to stimulate gain-taking. That's been borne out by every cut in history.

Plus, dippin, what your'e claiming is massively counterintuitive. Let me ask you something: if you were being taxed at 25%, and the next year you were told that if you keep doing exactly the same thing you'd be taxed at 40%, what would you do? If you're like any other person with a particle of sense you'd figure out ways not to do the same thing and try to set things up so that you don't have to fork over more of your income. This is simple common sense. This idea you seem to have that people in a different income bracket than you would react differently to incentives than you would is very curious. If anything, the fact they're more successful seems to indicate they have incentives figured out better than you do.