There are innumerable reasons as to why imposing higher taxes on the rich is both disastrous and counter-productive. Earlier, I compiled a list of some arguments against taxes here.
Today, I came across another informational piece in Business Today. Wish to share it with you as well as record some of the excellent arguments provided in it for future reference.
As the article notes, “There is not one instance in history where taxing the super-rich has worked as part of the solution to an economic crisis. The evidence, on the contrary, shows that it has only compounded the problem.”
France example
“The new French President, Francois Hollande’s main election plank was to levy a 75 per cent tax on the super-rich. This has resulted in a mini-exodus from France to Belgium and even, of all places, to Russia.”
Germany example
“In a war-ravaged economy, Ludwig Erhard, who shaped the German economic revival after World War II, had the courage to adopt a regime of lower taxes and very few controls. Erhard famously said he would let the money and Man loose and they would make Germany great. England did otherwise and suffered the consequences. Instead of following the Erhard route which has worked, we insist on repeatedly following the path of increasing taxes.”
India example
“The practice of taxing the rich has been tried in India with disastrous consequences . At their zenith, income tax rates soared to 97.75 per cent and this achieved the unintended twin objectives of massive tax evasion with serious erosion of our national character. Large scale cash transactions became the rule, fueling a huge black market economy.”
Further, the article notes, “The theory of bringing in equality and equity to society by taxing the super-rich is similar to Marxist ideology. It sounds delightful on paper but is utterly unworkable in practice. Marxist practices have ruined the Soviet, Chinese and North Korean economies with the attendant slaughter of 60 million of their own people.”
Some more reasons against higher taxes (from the article):
- Lower taxes = Higher revenues: “Another lesson of history is that rates of taxation are inversely proportional to the total collection of taxes. Lower rates of taxes have always resulted in higher revenues and greater compliance with tax laws.”
- “Taxing the super-rich primarily involves increasing the rates of personal income tax or property taxes. It ignores what actually happens with the incomes of the super-rich. Higher expenditure on goods and services results in more revenue being generated through indirect taxes. And if the taxes are low, there is no incentive to conceal either income or the acquisition of goods and services. Beyond a point, most income is then invested with financial institutions which, in turn, helps fuel industrial and economic growth.”
- “[Indirect taxes such as GST] has led to the practice of not reporting sales and purchases of goods and services. The introduction of GST will result in a huge boom in the black market economy.”
- “If a man cannot become rich honestly, he will do so dishonestly. Alternatively, if he has a sense of values and ethics, he has no option but to escape to other countries. The migration of a large number of India’s brightest engineers and doctors was in no small measure due to our socialist principles and heavy taxes.”
- Another article in Business Today read, “A higher rate of tax on high income group taxpayers is uncalled for as this would discourage entrepreneurship. It could lead to professionals relocating to low tax domiciles such as Singapore,” FICCI President Naina Lal Kidwai said.
- On the issue, CII President Adi Godrej said: “We have said any increase in taxes (on rich) will create a negative perception on investment and therefore should be avoided.”





