Tuesday, July 14, 2009

“House Bill to Hit Millionaires with 5.4% Surtax”

There are only two guaranteed outcomes if this comes to pass: it won't raise anywhere near the revenue that Congress believes that it will. The second is that it will help to kill job creation at small and medium sized businesses.

It won't raise the revenue because capital, and rich people, are mobile. There's always some country willing to reward, or at least not punish, success and innovation. As a result, capital flight to places like India, China, and elsewhere will slow business growth, harming the working and middle classes, as investments in plant, equipment, and information systems are made elsewhere.

The secondary consequence is that the gargantuan deficit and resulting debt from the government's takeover of healthcare will be even worse than expected.

It's a lose – lose, unless you're a bureaucrat or Congressman, in which case crises are opportunities not to be wasted. Even, or perhaps especially, if you were instrumental in creating them.

Update: OBTW, that "millionaire's surtax" will be moved agressively downwards when the cash doesn't come in as expected. That means you'll be paying more taxes for worse healthcare.