Tax the behavior you want to end.

If you want to move from fossil fuels to more renewable energy just tax the fossil fuels until the renewable energy can compete. This is what Europe does. This theory was used with cigarette smoking and every time the taxes went up there was a jump in the people who decided to quit smoking.

I would argue that this same logic applies to the Bush tax cuts. Right now the very rich have little incentive to do anything with their money. Their tax rate is the lowest in its history so they don't mind getting a huge bonus an putting it in the bank. The claim that the rich create jobs only works when the penalty for holding their money is so severe that investing it makes the most sense, like we did in the middle of the last century. If you want to create more jobs then tax the crap out of big bonuses and holding excessive amounts of money. Business would much prefer to own a new piece of equipment that they may be able to utilize in the future than they would paying heavy taxes for sitting on cash. With businesses currently sitting on over 1.8 trillion dollars in cash, even a small portion of additional investment would have a big impact.

Claiming the Bush tax cuts for the rich creates jobs and stimulates the economy completely ignores the facts and History refutes these Republican claims (and possibly my own assertions). The graph below shows we have had a wide variation in Marginal Tax rates yet the percentage change in GDP shows little to no correlation. This lack of correlation would suggest that if we are really concerned about the rising deficit, raising taxes on the rich is an excellent method for doing reducing it since it would have little to no affect on economic activity.



I believe that increasing taxes on the rich will have the multiple benefits of reducing the deficit and the widening gap in wealth, while having little to no affect on GDP. The middle class needs to stop buying the dream and start understanding the facts. Defending the rich only hurts you.