"The primary requisite for any new tax law is for it to exempt enough voters to win the next election."
- Laurence J. Peter (1919-1988), U.S. educator & writer
Having just finished my tax returns for 2003 and actually getting some of what I paid returned to me, I'm feeling pretty good about President Bush's tax cuts. Only a few hours ago while talking with my youngest son, I learned that he'll be getting a refund too--his first in quite some time. Several friends I've talked with are experiencing the same phenomenon: getting refunds when they've always had to pay. I like it. They do too.
Now I hear that Kerry is promising me even more next year if he becomes president. He plans to raise taxes on the top 2% of earners while cutting taxes on the other 98%. My son and I are pretty happy now. Will this make us happier?
London's Financial Times columnist, Amity Shlaes, doesn't think so. In commentary written for the Los Angeles Times (registration required), she suggests that Kerry's proposal smacks of class warfare:
"...Kerry would increase the top marginal tax rate on the highest earners, moving it from 35% up to the 39.6% rate set by President Clinton. This is where class war comes in. It's about reversing the work of President Bush, of course. But there is another factor driving Kerry here: The top-bracket crowd is an easy mark."
Shlaes points out that high earners already share one of the heaviest tax burdens in history, the top 5% paying more than half of U.S. income tax, and that additional taxes on these "strivers" will have a negative impact on the work and investment of this group. I think she's right, and this little story of unknown origin, which appeared on the KMJ580 weblog, somewhat imperfectly illustrates the premise of her article.
Aesop it's not, but there's a moral to be gleaned from this tale, don't you think?
Update: Matthew Miller, Senior Fellow at the Center for American Progress, and author of the book, The Two-Percent Solution: Fixing America's Problems in Ways Liberals and Conservatives Can Love, says "...the Right Gets Taxes Wrong" in a column he has written for the Los Angeles Times.
I'm not sure where he gets his data, but his logic appears to me to be sound.
6 comments:
No one likes to pay taxes. The problem is, people want good services from government, too. They just think that the people down the street should be the ones paying for them. (Or the people in a less prestigious suburb.)
The tax cuts that have actually been implemented so far were those targeted to middle-income brackets that the Democrats in Congress got inserted into the tax packages that Bush passed. The largest cuts for the highest brackets are only beginning to kick in, and their impact on the deficit is enormous.
One could make a case that, since the very higest income brackets got a very disproportionate share of the economic benefits of the 1990s expansion, the general public shouldn't be especially concerned about providing them new tax subsidies. But to hear Republican politicians tell it, almost nothing is quite so painful to the richest Americans as paying taxes to support their country.
Speaking of which, one reason that Bush's credibility on the Iraq War and the "war on terrorism" is plummeting is that he hasn't asked any real general sacrifice. These were supposed to be wars where we could have glorious victories without any of the comfortable being discomforted. Now it's pretty obvious that there's a lot of discomfort involved. The pain of dealing with the enormous deficits is even being felt already in higher gas prices resulting from the falling dollar. - Bruce
Anyone with half a brain knows not to put too much stock into a presidential candidate's promise of anything. What candidate Kerry is proposing, is just that--a proposition certainly nowhere near reality now or even in the future. We could call it wishful thinking aloud.
Oh, and by the way, my son got hit with a nice tax bill this year thanks to the "cut" last year. I guess you got lucky.
Uh, isn't that what a "proposal" is supposed to be? A suggestion for something different than what we have now? Bush's proposals were just "wishful thinking" at this time four years ago, too. - Bruce
The Center for American Progress had an interesting page showing how Bush's middle-class tax cuts were actually a tax increase...
http://www.americanprogress.org/site/pp.asp?c=biJRJ8OVF&b=34039
Also interesting: "the percentage of federal tax receipts from corporate income taxes has been in decline since the 1950s, from over 30% to under 10%. And the General Accounting Office reported last week that 61% of U.S. corporations paid no taxes during the booming period from 1996 through 2000."
http://www.usatoday.com/news/opinion/editorials/2004-04-11-our-view_x.htm
The point that is being missed, is that the "strivers" of the world aren't going to lose their motivation if their taxes are increased. For most of them, it's not about money, that's just a way of keeping score. Do you think Bill Gates is going to quit trying to conquer the world because his taxes are to high? If you are in the top 2% of earners, how do you not generate taxable income? Pull your money out of your investments and put it in your mattress?
In the little parable, the man who stopped paying for dinner did it by removing himself from his society. Exactly how do you do that in the real world?
I believe the "strivers" that Ms. Shlaes used as an example in her column were a working couple who made a pretty good living, not a Bill Gates or Warren Buffett. Gates and Buffett, to be sure, could be taxed at 80% and still have plenty of disposable income left, but I don't believe such an onerous rate would be very just.
Gates may be trying to conquer the world, as you point out, though as he does it, he's producing some pretty good products that thousands of us use everyday. His wealth, I believe, has been derived from lots of hard work and much business acumen, and he has reaped his rewards accordingly. On the way to doing that he's made thousands of other people wealthy, provided countless jobs to people, given hundreds of millions to charity, and made the world a more productive place. I would also imagine that he and his corporation have both paid a significant amount of taxes in their lifetimes.
Sure, wealthy people have a lot of taxable income, and they don't stuff it into a mattress. That's one of the reasons they're rich. They invest it. And these investments usually help create more jobs, more products, and more business, which in turn enable more people who aren't as wealthy to improve their lot in life, as Mr. Gates has proven so excellently.
I don't believe the guy in the fable who was footing most of the bill for his dinner group simply removed himself from society, as you suggest. I believe he simply moved to a place more friendly to him as have thousands of individuals and businesses in California where taxes are high and regulations are many. Ask the governments of Nevada and Arizona if they're not happy to have these disenchanted Californians as citizens of their states, and ask those who have migrated why they chose the destinations they did.
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