So What If Taxing Rich Hurts the Economy?
Consider this headline from a Reuters article in The Huffington Post: “Raising Taxes on Rich Won’t Hurt Economic Growth, CBO Says.” But the first paragraph refutes the headline: “Allowing income tax rates to rise for wealthy Americans would not hurt U.S. economic growth *much* (emphasis added) in 2013 …” The CBO did *not* say, as the headline suggests, that raising taxes on the rich has no negative economic effect. In fact, the CBO actually said that extending the Bush-era rates for *all* would increase economic growth by 1.5 percent. If, however, the Bush era rates expired for the rich – but were retained for everybody else – economic growth would still increase, but by 1.25 percent.
Consider this headline from a Reuters article in The Huffington Post: “Raising Taxes on Rich Won’t Hurt Economic Growth, CBO Says.”
But the first paragraph refutes the headline: “Allowing income tax rates to rise for wealthy Americans would not hurt U.S. economic growth much (emphasis added) in 2013 …” The CBO did not say, as the headline suggests, that raising taxes on the rich has no negative economic effect. In fact, the CBO actually said that extending the Bush-era rates for all would increase economic growth by 1.5 percent. If, however, the Bush era rates expired for the rich – but were retained for everybody else – economic growth would still increase, but by 1.25 percent.
In other words, raising taxes would result in less economic activity, not more. Herein lies the key to understanding why the left wants higher taxes for “the rich.” To the rich-should-pay-more crowd, the question of whether raising taxes hurts economic growth is less important than the issue of “fairness.”
Then-presidential candidate Barack Obama, in 2008, was asked why he insisted on pushing a capital gains tax increase given that, historically, higher capital gains rates meant less revenue:
ABC News’ Charlie Gibson: “You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, ‘I certainly would not go above what existed under Bill Clinton, which was 28 percent.’ It’s now 15 percent. That’s almost a doubling if you went to 28 percent. But actually Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20 percent.
Then-Sen. Obama: "Right.”
Gibson: “And George Bush has taken it down to 15 percent.”
Obama agreed, “Right.”
“And in each instance,” Gibson continued, “when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?”
Obama explained: “Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness (emphasis added). We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year – $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair. And what I want is not oppressive taxation. I want businesses to thrive, and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair.”
Years earlier, in 1998, the then-state senator told a Loyola University audience: “The trick is figuring out how do we structure government systems that pool resources and hence facilitate some (wealth) redistribution – because I actually believe in redistribution, at least at a certain level to make sure that everybody’s got a shot.”
The then-Democratic nominee Obama told Fox’s Bill O'Reilly that wealth redistribution was the neighborly thing to do. “If I can afford it,” said Obama, “what’s the big deal for me to say, ‘I’m going to pay a little bit more’? That is neighborliness.” And a month before the 2008 election, Obama explained to “Joe the Plumber” that “when you spread the wealth around, it’s good for everybody.”
In a 2001 Chicago radio interview, then-state Sen. Obama said: “The Supreme Court never ventured into the issues of redistribution of wealth (emphasis added), and sort of more basic issues of political and economic justice in this society. … One of the, I think, the tragedies of the civil rights movement, was because the civil rights movement became so court-focused, I think that there was a tendency to lose track of the political and community-organizing activities on the ground, that are able to put together the actual coalitions of power through which you bring about redistributive change – and in some ways we still suffer from that.”
Investor’s Business Daily says raising taxes on the top 2 percent figures to bring in annually about $34 billion. Others put the number at twice that. Either way, it is a tiny fraction of the $1.1 trillion annual deficit. And an Ernst & Young study says this would cost 700,000 jobs. So raising taxes on the rich a) brings in a small amount of money and b) reduces, not increases, economic activity.
Why increase taxes on the rich at all? Answer: It’s a matter of “fairness.”
Andy Stern, the former head of the Service Employees International Union, the fastest-growing American union, describes the economic philosophy of the left: If raising taxes on “the rich” hurts the economy, that is an acceptable price. “Western Europe,” says Stern, “as much as we used to make fun of it, has made different trade-offs which may have ended with a little more unemployment but a lot more equality.”
Any questions?
COPYRIGHT 2012 LAURENCE A. ELDER
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