Is it worth it to tax the rich? Yes…and no. I don’t hold this view just because it’s the belief of the Wall Street Journal. Taxing anyone at a higher rate will tend to bring in a little more revenue (assuming employment and GDP levels hold tight or improve).
If anybody can pay an extra 3-5%, it makes sense that it would be those of us a little better off. However, the revenue gains are so menial, that a deal in Congress that lacks these hikes is not worth blocking for the sake of politics and promises.
Indeed, President Obama’s promise should have simply been to improve the economy. However, his base largely responds to the demonization and higher taxation of the rich. Now, political promises are threatening the system over something that is not really worth it. If you can get it into a bill, great. If not, it’s not worth the small gains, and it’s not worth the economic risks to hold up a deal.
First, why we might consider raising taxes on the rich: Extra $90B a year, a generous estimate by Bill O’Reilly in the “Rumble in the Air Conditioned Auditorium”. Over ten years that’s $900B. Not much when you compare it to projected government spending. But, hey, it’s something.
Now, why taxing the rich does not deserve to be a “staple”, a point on which one party refuses to budge: 1) It only brings in $90B a year. By 2020 the debt is projected to be$ 20,000,000,000,000 ($20T). Taxing the rich brings that to 19,370,000,000,000. 2) Concerns of inflation. 3) Holding up a bill for this political talking point can do serious damage to the economy.
This will hurt employment which will mean fewer people paying taxes, fewer products being made, and less revenue altogether for the government, which I’m sure will be increasing spending to “stimulate” the economy yet again.
I think Time™ Magazine said it best when referring to the tax hikes: “It’s highly likely that the amount would barely put a dent in the nation’s debt picture – akin to sending the best pitcher in this week’s Little League World Series up to St. Louis tonight to face Albert Pujols, Matt Holliday, and the rest of the Cardinal’s line-up.” I liked that analogy, but I put it this way. I think it’d be like going to the world’s most celebrated restaurant with Warren Buffet and picking up the tab “for him”. Pretty laughable.
Interesting to note that Buffet, famed investor and supporter of tax-the-rich policies, could donate his net worth to the U.S. government and that machine would eat up his entire $47B fortune in about 12 days.
U.S. debt is growing and accelerating. The deficits are widening and there is very little the nation’s millionaires can do to solve that problem. Well, little they can do on their own. But if they spend and borrow to build businesses and hire employees, we’ll have more people making more taxable incomes which means higher revenues for the government.
Increases in employment will be followed by increases in consumer spending, which means increases in sales tax. Real estate values rise, which means higher revenues for property taxes and more taxable properties. Maybe once times are better, the economic outlook a little more certain, and employment a little more steady…maybe then we can seek a little more revenue from fat cats living the high life. But for now, we need more taxable salaries, not higher taxes on a few salaries.
Most people up on the issue have heard the inflation argument. While it’s too complicated for the scope of this article, a message from the CBO will suffice:
“The full extension of the tax cuts through 2012 would increase GDP and employment more in 2011 and 2012 than would the partial extension through 2012 because it would have a greater overall impact on after-tax income.
However, the economic impact per dollar of revenue reduction from the full extension would be smaller than that from partial extension because a greater proportion of the tax savings from the full extension would go to relatively high-income households, which tend to spend less of an increase in income than lower-income households do.”
As a final thought, I’d like to propose the idea of pegging tax brackets to cost of living. Obama is a big fan of labeling families with over $250,000 in income as “rich”. But for families in New York, Los Angeles, San Francisco, etc., $250,000 gets you a small apartment and hopefully a good public school.
Now is not the time for petty games and promises that only promise political gain. Now is the time for everyone to pull together, get back to work, and contribute to the public services that we all use. If we go “off the cliff”, the rich won’t be able to solve our problems, no matter how much they’re taxed.
Tyler McDermot | Elite.