PJ O’Rourke said the problem with trying to soak the rich is that they can afford towels.
Exactly so. Let’s look at two examples. In 1990, in a fit of populism, the US passed a special tax on the purchase of yachts. These were the results:
1) The Government collected very little revenue from the tax.
2) The people who wanted yachts bought them anyway, although usually overseas to avoid the tax.
3) Many US yacht companies went bankrupt and were forced to lay off thousands of skilled craftsmen and other workers with good-paying jobs.
In attempting to punish the wealthy, the Government ended up screwing the middle class instead. This sort of backfire happens fairly frequently.
Lawmakers in Maryland, oblivious to what happened with the yacht tax, decided to put a special tax on millionaires in 2008. It was supposed to bring in an extra $106 million. Instead, the state lost $257 million.
Hey, only a person with the tiniest amount of common sense could have predicted that rich people would leave in order to avoid paying tens of thousands in taxes.
I’m going to write this in all caps because it needs to be:
HIGHER TAX RATES NEVER LEAD TO HIGHER REVENUES!
Never had, never will, never, ever, ever.
One would hope that such examples would illustrate the futile and counterproductive nature of luxury taxes. Alas, every leading progressive politician from Bernie Sanders and Elizabeth Warren rails against the rich. Amusingly enough, the last major attempt at soaking the rich, the Foreign Tax Account Compliance Act, was introduced by Democrat Charlie Rangel, who was censured for owing tens of thousands in back taxes for income he received from rent on overseas property.
He is so clueless he sponsored a law criminalizing the very thing he had been doing. That is truly a special kind of stupid.
But even stupider than that is trying to tax people who know the law, have a lot to lose, and are able to easily evade it.