The supply-side tax con

By Henry CK Liu

In recent decades, an intuitive myth has been pushed on the unsuspecting public by supply-side economists - that low taxes encourage corporations, employers and entrepreneurs to create high-paying jobs. The counterintuitive historical truth is that a progressive income tax regime with over 90% for top-bracket incomes actually encourages management and employers to raise wages. The principle behind this truth is that it is easier to be generous with the government’s money.

In the past, when the top corporate income tax rate was over 50% and the personal income tax rate at over 90%, both management and employers had less incentive to maximize net income by cutting costs in the form of wages. Why give the government the money when it could be better spent keeping employees happy?