I think, tax bomb is very evident and would eventually explode. With a deficit of two trillion, the government has to collect money from someone. And the only source for the government would be the taxes. Now the government plans to collect it from the top 2% of the society and slowly this is going to expand to include a greater segment of the society.
After the world war, America had witnessed tax rates as high as 90%. Are we going to see such high rates again? The answer could be very well a emphatic yes.
But some of the things that would happen as a consequence is a case of lot of people finding out alternatives to not filing their taxes. A tax avoidance industry will prevail and this would be something which existed in India before the taxes were reduced and simplified. Besides if the rich are taxed a higher rate, it will also result in reduction in the number of rich people as they would gradually have no incentive to earn. That will reduce the number of entrepreneurs and finally result in an overall economic slump. Are we seeing something similar to what Aynn Rand portraid in her nover Fountainhead?
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