Will Tax Increases Cause Capital Flight?

The Washington Examiner argues that recent proposals to increase federal tax rates to 55 percent on households making over $250,000 per year would result in the U.S. having some of the highest marginal tax rates in the world, higher than “such socialist havens as Sweden.” 

It says that “this quantum leap in the U.S. tax burden would have deep and destructive consequences for all Americans. Tax shelters and evasion gimmicks not seen since the Carter years would resurface. Investment capital — which is the engine of economic growth — would flee overseas, taking jobs and opportunity with it.”

The economy also faces other risk factors, such as short-sighted federal policies designed to prop up overextended borrowers.  Those policies may also be reducing the flow of investment in the U.S., in addition to costing taxpayers and people who save rather than borrow money billions of dollars.