Here's another thing that I think will help demonstrate this. It's called the
Laffer Curve, and you may have heard of it before. Basically, this is how it works. If a government has a 100% tax or a 0% tax, it won't make any money at all. But obviously there is a place somewhere where the government
can make money. So this creates a curve, the Laffer Curve, and somewhere along the curve is a place where the government makes the maximum amount of money. Nobody knows where this is, as economics is a very complex science, but it has become clearer in modern times and we get closer to finding it everyday as the economy shifts and tax rates change.
However, the Bush tax cuts have given us very valuable insight into this, because government revenues increased in general, not just because of the capital gains cut. Unfortunately, new ideas like this are not always immediately put into effect, and public opinion has more to say on actual policies than science.
http://en.wikipedia.org/wiki/Laffer_curve
http://en.wikipedia.org/wiki/Image:Laffer-Curve.svg
Please not that this curve is
not to scale. A 50% tax
is not the maximum, but this helps to illustrate the concept. A libertarian economist had this to say about the concept, ""In the United States the recent advances in tax rates produced only negligible revenue results beyond what would be produced by a progression which stopped at much lower rates."
With the national debt topping 4 trillion dollars, I propose that the government try to find this through very small changes in the tax rate over a large period of time, until it is found and the government gets as much money as possible. Then, when the budget is balanced, we can further reduce taxes to let people get as much of their money as possible. It seems like a simple solution to me, and even then, liberals who want government programs to help the poor should stick to the optimum on the Laffer Curve. An optimum which we can safely assume, is around the lower taxes that Bush has given us. So
liberals should support these tax cuts, instead of calling them "irresponsible" as Obama has done.