Why Not Raise Taxes On The Super-Wealthy?

By Frank Hill 

American Attitude Towards Higher Taxation
One of the most illuminating and humorous comment ever made by a US politician came from the colorful Senator Russell B. Long of Louisiana (of course!)

He was the long-term running Chairman of the Senate Finance Committee from 1966-1981 who once said no one really ever wants to pay higher taxes. Instead, here's what they really want Congress to do:

'Don't tax you.  Don't tax me.  Tax that fellow behind that tree!'

He was a Southern Democrat who also understood that 'you can't have capitalism without capital!' as he once said as well...


He was a Democrat who understood that money does not grow on trees and it doesn't come free from countries such as China when we borrow from them.  Would it be that the Democrat Party would return to such sound fiscal understanding sometime in the near future.

We have been intrigued and somewhat bemused by the following argument for a long, long time:

'We simply have to raise taxes on the wealthy in order to close this budget deficit!'

'Why?' we typically ask such people.

'Because it is the fair thing to do!' they usually throw back as well-worn bromide they have picked up along the way from college or MSNBC or one of their friends or colleagues.

Let's pick at this scab a little and see if a little logic might seep into this discussion perhaps:
1. When you are spending too much money in your household budget, what do you do first?
Precisely.  You stop overspending your income first and right away!  Sell your new car and buy a good used jalopy.  Put your kids in public school and take them out of private school.  No more vacations in Majorca when going to Dollywood is within a day's drive and back.
2. If a company you had invested in has been losing money because of poor management, do you keep shoveling your hard-earned money into it before or after they have committed to cleaning up their act and stop wasting so much of your money?  
Afterwards, of course, silly.  You would have to be a dumbbell of the first order to just open up your wallet and checkbook and say:  'Go ahead.  Take it.  Take ALL of it!  I know you need more money to waste and fritter away so take mine.  I don't need it or want it since I can't think of anything better I could do with it like cure cancer or solve world peace!' 
3. If you had cut previous deals with advocates of higher taxes in Congress (Democrats), and then they had failed completely to ever cut any spending as a result of your 'deal made in good faith'...would you do it again without ironclad 100% guarantees that spending will be cut first before any higher taxes are collected?  
Heck no!  That would be more stupid than Charlie Brown going to kick the football held by Lucy after about 1000 times.  Even conservative Republicans aren't that stupid! They may be thick as a brick but even an old dog that has been scalded a couple of times won't go near the stove anymore.
4. Just how much money are we talking about anyway when it comes to socking it to the wealthy? Will it come close to balancing the budget and delivering us to the utopian nirvana its advocates always seem to roar about?  
Darned little revenue when it is compared to the sheer magnitude of what we are facing nowadays.  If we went back to the higher tax rates just on the wealthy that were in place during the Clinton Administration, we can expect to maybe collect less than $60 billion per year for 10 years, assuming the wealthy are not smart enough to figure out how to shelter it from taxation anymore (which is highly doubtful).  
Such 'bold thinking' (sic) would reduce our annual deficits from $1.2 trillion to maybe $1.140 trillion per year. About 5%. Per year. Congratulations for making this the biggest mountain out of the smallest molehill in history.
Here's our favorite 'unintended consequence' of raising taxes on business or other people who run a business or invest in them or own one:

'Each and every time taxes are raised on a business sector, they don't pay the tax.  YOU DO! In the form of higher prices for the goods or services they provide. They just add that tax on to the price of everything they sell to you and then you pay a small part of it with each and every purchase.'

Keep in mind that while it might 'feel good' to stick it to 'The Man' or the rich people running big businesses or even small businesses, it will come back to haunt you in various and sundry ways.  It always does.

To be absolutely honest about it, aside from the fact that we are not real fans of raising taxes to pay for more government and we don't think raising taxes will balance the budget when over-spending is our prime problem to begin with, we really could care less about what happens to the Hollywood stars, the Silicon Valley superstars or the NBA/NFL/MLB players who make $100 million in any given year.  Or even just $10 million/year.

Super-wealthy people can more than take care of themselves...and they should.  They should not be eligible for any taxpayer-funded support or subsidy or bailout whether it is in the form of Social Security payments down the road or Medicare which is subsidized at about an 85% clip today or any federally-sponsored bailout ever if they make the wrong business decisions and have to declare bankruptcy to get out of it.

If they voted for Obama, then they have given their assent to being taxed at higher rates. Maybe we should just let them get their wish.  (But don't let any of the pro athletes transfer to play in the state of Florida like LeBron James did since Florida doesn't have an income tax...that is what is really 'not fair!')

The really odd thing, in a classic Mephistophelian 'Bargain with the Devil' sort of way, is that now we have conservative Republicans, Club for Growth and Tea Party members digging in their heels for a concrete 'No More Taxes On The Wealthy!' stance, even though a majority of people making over $100,000/year in annual income voted for President Obama on November 6!  It is the truth...just saw it in some polling briefings recently.

The higher the income, and the more liberal the area such as Hollywood, San Francisco/Silicon Valley, Washington DC and New York City, the more likely it is that these wealthy people voted for President Obama over Mitt Romney for some reason.

Maybe we should just let them get their wish.

(Editor's Note: Frank Hill's resumé includes working as chief of staff for Senator Elizabeth Dole and Congressman Alex McMillan, serving on the House Budget Committee and serving on the Commission on Entitlement and Tax Reform. He takes on politics from a fiercely independent perspective at the blog Telemachus).

4 comments:

  1. The best simple, quick, and easy tax reform idea I've heard during this debacle is to simply cap total deductions for everyone. If the number is chosen wisely - and indexed! (See AMT shell game for reference) - middle income people who depend on the home deduction won't be touched, but the "super-rich" will be limited in their ability protect income with deductions. This quick fix works with no changes whatsoever to the tax code - and could be a nice stop gap, easily understandable by everyone, while the bigger lift of general code reform is undertaken over time.

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  2. that is the way they will probably get this done short-term

    long-term, we need to dump this whole ossified, archaic, sclerotic mess of a tax system and replace it with one plain and simple consumption tax at point of purchase.

    The receipt could say: Thanks! Your just paid $1.00 in Federal Consumption Tax to support the following expenses of your government: .20 for defense; .20 for social welfare programs; .50 for SS and Medicare and .10 for interest on the national debt that we stupidly allowed to get out of control from 2002-2016.

    That should set some eyes afire!

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    Replies
    1. Wholehearted agreement on consumption tax being superior to income tax. The trick would be ensuring a consumption tax *replaces* the income tax, and leaving no chance of ending up with both. A constitutional amendment is needed. But, if it can be done, a consumption tax is naturally "progressive" (rich people buy more stuff), gives earners incentive to earn more while simultaneously providing disincentives to the crass consumerism liberals love to hate, and (best of all) makes the IRS practically irrelevant because the tax is collected basically anonymously at points of sale. Imagine the productivity boost from making April 15 just another day on the calendar (March 15 for businesses)! The libs can exempt anything that is a legally valid Food Stamp purchase from the consumption tax. I'd be OK with that.

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  3. Sounds great folks! The only problems I see with your ideas in the last three replies is that they make way too much sense so we know they'd never survive in DC.

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