Class envy and taxes
Using class envy, and jealousy for those who make big salaries – or worse, billionaires – Democratic politicians are again raising the idea of soaking…we mean taxing the rich as a way of getting more money for their pet projects. There is only one problem: their grasp of history and economics. They are wrong on both counts.
For Democrats – we were going to use the word “liberal” but did not want to be redundant – new programs like free college and Medicare for all are the goals. So, whether it’s a 70 percent tax on money over a certain amount, or a 90 percent tax on billionaires, depending on the politician, the idea is these taxes will pay for them.
Let’s look at history first.
Many Democrats point to the 1950s and the 1960s as a reason for the push toward higher taxes on the rich. In fact, the high marginal rates, holdovers from the war years when taxes were high to pay for defense, were on paper big money makers. So, the idea is to go back to the 50s.
Unfortunately, they leave out some very salient facts, either deliberately or probably because they never bothered to find out. The first salient fact is few if any “rich” people paid the highest tax rate. The 1950s and 1960s was the era of the “tax loophole.”
While on paper rich people were taxed at exorbitant rates, the fact is many paid more normal portions of their income to the government, employing various means of deductions provided in the tax code.
The industry of the “tax consultant” was a by-product of post-war taxation, which in the end did not produce for the government the amount of revenue it expected. It was also during this time the Congress began heaping various programs into the budget, which brought spending to heretofore unheard of numbers outside of wartime.
Salient fact two is that according to the IRS’ own figures, the top one percent of taxpayers already by 40 percent of the revenues to the federal government. The top 10 percent pay 97 percent. That means the rest pay a paltry 3 percent. What is needed is taxation across the board so that people have (to quote Joe Biden) “skin in the game.” We are dangerously on the heels of too many people paying no taxes at all while expecting others to foot the bill.
Salient fact three is that whenever we say “tax the rich,” we have to first find out who the “rich” are? Remember when the “rich” earned $150,000 under the Obama tax rates? In areas such are ours $150,000 is not a lot of money when a house and two kids are involved. And many of those are small business owners, not the idle rich.
While the politicians are indicating they are going after billionaires, we’ve seen this shell game before.
Salient fact four, under the current tax cuts, the government took in more money than it has ever collected in the last two quarters. It still isn’t enough because it’s being spent at record levels. We don’t have a revenue problem, we have a spending problem.
Besides, does anyone really believe Medicare for all will come in at the already astronomical price of $32 trillion over 10 years? Economists believe that is on the “low end” of the price range. The fact is gutting the defense budget, taxing the rich, and coming up with any other tax will not pay for the plan. If we truly want to rein in health costs, a better way is to require hospitals and doctors to post prices. There is one rate for those with insurance, and those for those without. Guess which ones are higher?
Finally, we tried it the Dems’ way from 2008-2016 under one Barack Hussein Obama. It failed. Money was put off-shore, people kept their money in bank accounts and invested it only in stocks – which soared with friendly monetary policy. The middle class, the people who will pay most of the taxes when the rich are tapped out, stagnated, and will stagnate again if Democrats have their way.