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Policy Stories Discussion

Tax Flight: Behavioral Responses to State Income Taxation
Why do policy makers insist on increasing taxes?


It is a conundrum of our education. If you raise the tax rate you get more revenue--makes sense, but the exact opposite is true. Proven many times throughout history. President Trump cut taxes (needed more) and the Federal Government had record revenues. The challenge is that the Democrats sell raising taxes to help "those less fortunate" and the emotional tug on many people says "OK". The difficulty of many in understanding the inverse nature of changing rates and their effect on tax revenues compounds the problem. Lower tax rates result in increased tax revenue due to higher economic activity and velocity of money.