The Wealthy Find Ways to Avoid Tax Increases

Supply-sider Arthur Laffer says that Obama’s upcoming tax increases are encouraging the wealthy to front-load their income to 2010, which will cause the economy to collapse in 2011.

Only the very wealthy with a large source of income from capital gains have the ability to shift their tax burdens. These people are shifting things around so that they pay the current capital gains rate of 15% rather than ordinary income tax rate of 39.6% in 2011.

Thus, the 2011 tax increases may raise less revenue than the Obama administration expected.

See Robert Frank, Wealthy Shift Their Income to Avoid Higher Taxes, WSJ, June 8, 2010.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.