Free Markets, Free People
Bruce Bartlett takes a look at Britain’s experience and a study that documents it and concludes the same is probably true for here:
The study concluded that the behavioral effect of raising the top rate was much more powerful than anticipated. Two factors in particular had a large effect on revenues.
There was a timing effect. People moved income that they anticipated receiving forward so it would be taxed before the new higher rate took effect. They also postponed the receipt of income into the future in anticipation of a change in the tax rate after the election of a new government.
Also, because the British top rate had increased above that in all other major countries except Japan, many Britons relocated in reaction. For example, 1,379 people in high-income occupations moved to Switzerland in 2010, a 29 percent increase over the previous year.
The point, of course, is those who fall in the bracket in which the tax is increased are going to do what is necessary to minimize the impact of that tax.
Human nature 101. Consequently, the revenue projections are almost always high – and wrong.
Additionally, the Democrats like to imply that taxing the rich is a panacea for the spending problems we have. In the name of “fairness” they imply that if the rich would only pay their “fair share” well everything would be hunky dory. Of course we know the real problem is spending not revenue. But regardless, the real effect of the “Buffet Rule” for instance, is negligible:
But a March 20 analysis from Congress’s Joint Committee on Taxation estimates that implementation of the so-called Buffett rule, which would require those making $1 million or more a year to pay an effective federal income tax rate of at least 30 percent, would raise only $46.7 billion over the next 10 years. That’s a drop in the bucket compared with the $41.2 trillion in federal revenues expected to be collected under current law.
Note that last number and remember, this is a government which is claiming that it can’t get by on $41.2 TRILLION over 10 years.
Where again is the problem?
Funny how the left constantly tries to redefine words or terms in order to justify their actions. Current tax rates are referred too as “tax cuts” when they refer to the “rich” but no other class of taxpayer. The fact that the “rich”, as defined by Obama and company, pay the lion’s share of taxes now while the bottom 50% of “taxpayers” pay a combined 2.75% of all taxes is ignored.
And now, with renewed attacks on the “rich”, it’s “not class warfare. It’s math.” Now, I guess, we’re redefining “math” as well. Notice what isn’t being talked about which usually enters any public discussion by the left? Fairness.
In fact, changing the tax rates on the “rich” is a leftist wet dream, because somehow they’re of the opinion that what the “rich” have earned really fell from the sky and they were just lucky enough that it fell in their backyard. So “fairness” is redistribution, by their redefinition of course.
Yes, it is “only math” if you believe in a very pernicious premise – that government has first claim on everything you earn. That you don’t “deserve” to keep what you make.
J.E. Dyer wrote a great post at Hot Air on the subject. I recommend it. What the “it’s math” crowd want you to ignore is this:
If any of us doesn’t deserve to keep everything he has earned, then that man is a slave. Alternatively, he is less than human; he has no moral standing, and no unalienable rights inhere in him. He is like a farm animal.
Of course we all deserve to keep our own money. If it is ill-gotten – stolen, swindled – then it’s the crime that deprives us of it, not any inherent function of the armed authorities to prowl the land in search of “undeserved” bank balances.
The question of what we “deserve” boils down to which came first, the individual human with rights, or the state. America was founded on the principle that the individual human with rights comes first. Any idea that violates that principle is counter to our founding idea. It is not possible to reconcile with our founding principle the idea of collective schemes in which we make some modification to “what we deserve.” We either deserve to keep all our own earnings – money – wealth – goods – or we do not have unalienable rights.
In this case, it is the “rich” who are being used as the farm animals.
Here’s the truth about taxes paid. The “rich” or top 1% pay 38.02% of all income taxes collected. So over 1/3 of all taxes are paid by 1%. Expand that a little and the top 5% pay 58.7% – well over half of all income taxes collected. The top 10% pay 69.94%
So 10% of all income earners are paying 70% of all taxes.
Entry into those hallowed ranks? Well to be in the top 10%, your adjusted gross income need merely be $113,000. “Rich”, right?
Of course not, in fact, most who understand what it requires to live realize that $113,000 is working class. The top 5%’s income threshold is $159,000. And the top 1% is $380,000.
So what Mr. “It’s not class warfare” is recommending is raising taxes on those who already pay 38% of all taxes. And obviously, in the convoluted world of the left, that’s fair.
The president criticized Republicans for insisting no taxes can be raised, and said it would not be possible to improve the nation’s fiscal standing without new taxes on the wealthy.
He rejected criticism that his proposals amount to class warfare, saying that after a decade of unchecked spending, every American has to pitch in and pay their fair share. Otherwise, Obama said, the U.S. will try to cut programs for the middle-class and the poor while protecting tax cuts for the wealthy.
You have to love the so-called reasoning. “After a decade of unchecked spending, every American has to pitch in and pay their fair share”. The government spent it, but it is up to those government supposedly serves to pay it off – try that on your boss sometime. The entire pitch here is to claim a single class of people haven’t paid their “fair share” (fair share being redefined as over 38% of the total for one and only one class) of what the government has spent without consulting them or anyone else.
And 1% paying 38% of the load is fair? How is “every American” pitching in when he’s only talking about raising taxes on a single class … the 38% class? And how isn’t that class warfare?
Raising taxes on the top 1% has become Obama’s panacea for everything. You almost want to say “go ahead” and let the truth finally sink in. The top 1% cannot cover the profligacy of the government in any way, shape or form, even if the tax rate were to be raised to 100%. As taxes go up, the ‘rich’ find ways to protect their wealth. It’s again Econ 101 stuff. And, of course, they have every right to do so. It’s their money, not the government’s.
Yeah, it’s not “class warfare. It’s math”.
But only as the left has redefined each concept.
If you were to ask them though, the taxes will be collected only from corporations and the rich. The idea is to stick them with the bill for services the rest of the voters have decided they’d like but can’t afford. It’s a bit like getting on a train without a ticket, finding a well dressed man, and having the ticket collector point a gun at him and demand ticket money for your trip.
If I were the well dressed man, I’d probably find alternate transportation for my next trip. If I was a “rich” person in Oregon, I might begin scouting out a new place to live. The voters have certainly made it clear they feel they have every right to loot my earnings at will. Why would I want to give them any more chances?
Measure 66 raises the income tax paid by households earning at or above $250,000 a year or individual filers who make $125,000 or more. Measure 67 raises the state’s $10 minimum corporate income tax.
Together they generate an estimated $727 million, which has already been budgeted by the 2009 Legislature for public schools and other state services.
So instead of cutting budgets at the state level to what they can afford, Oregon voters have doubled down and bought into the populist notion that they can do it on back of those demonized rich people and evil corporations.
Corporations, of course, have a number of choices. Among them, if the tax isn’t too high, is pass the cost on to their customers. That would most likely be those who voted “yes” on Measure 67 ironically. If it is a large tax which is not easily passed on to the consumer, the corporation has other choices. It can cut headcount – lay people off – to recoup the cost. Or, if it is really crippling, find a new home for their business in a state which is friendlier toward business than is Oregon. What they most likely won’t do, at least not anytime soon, is hire and expand. And if I was a corporation looking for a new home, this vote would have me cross Oregon off the list.
The “rich” also have options. Find ways to hide that income. Like increase 401k savings so that taxable income is below that number. Many are probably small businesses which will hide income in the business vs. putting it in the owner’s income. If none of that’s possible they may find a new home for themselves and their business. One of the benefits of being “rich” is it does tend to give one some options as to where to live.
That’s not to say they will or even that all of them object to this new tax, but Oregon voters shouldn’t fool themselves that this sort of taxation is beneficial in the long run to an atmosphere which will attract and keep businesses or people who have the money to help the economy. Oregon might be a nice place to live, but it’s not that nice – especially when alternatives exist.
UPDATE: Megan McArdle points out something about the tax on business that makes it even worse:
The business tax changes apparently include a gross receipts tax, which is really an awful tax, especially during a downturn. Companies which are actually losing money may still owe taxes, which could hasten their closure, and the evaporation of any jobs they provide.
Any business that took in a dollar last year owe taxes on it. That means, as McArdle points out, marginal businesses who have just managed to hang on (and continue to provide employment) may be forced to lay off or close their doors and liquidate to pay the tax. A particularly “smart” move in a recession.
Additionally, as Tonus points out in the comments – the $727 million will be spent on the static analysis which said such a tax would yield that amount of revenue. But life isn’t static and those effected will immediately begin to do things which will lessen the impact on them and, of course, make that revenue stream smaller than anticipated. That means two things – more deficit spending and, most likely, more taxes on those who approved these to measures in order to make up the revenue shortfall.
I‘m still amazed that many people who put their support behind Obama in the presidential election, are suddenly discovering things about him they don’t like.
Really? Now they discover Obama is a class warrior? It comes as no surprise for those of us who took the time to assess where he came from and what (little) he’d done.
Suddenly, the rich are concerned that the guy they backed may not be what they hoped he was (notice that’s the correct context in which “hope” should be used when “hope and change” is spoken):
Some of Barack Obama’s richest supporters fear they have elected a “class warrior” to the White House, who will turn America’s freewheeling capitalism into a more regulated European system
Ya think? What was your first clue – his remarks about “spreading the wealth” to Joe the Plumber or the thousands of other things he said which might imply such a tendency?
And as an aside, America’s capitalism is about as “freewheeling” as a modern waterslide is “death defying”.
Chris Edwards of the Cato Institute, a free enterprise think tank, said Democrats in Congress were unnerved by the president’s latest plan to raise $210 billion over 10 years from multinational corporations.
The money is needed to pay for a national debt that will double over the next five years; and triple over the next 10 years to $17.3 trillion. But the crackdown already faces fierce Democratic resistance.
“These big companies are based in New York Boston, Seattle and Silicon Valley, where Democrats dominate,” Mr Edwards said. “Obama’s tax plan is already cleaving him from his big corporate supporters,” he said.
The good news in this, of course, is that Congress has to pass the legislation that enables this, and per Edwards, they’re getting cold feet. The reason is also obvious – any “cleaving” of Obama from “big corporate sponsors” also means the rest of the Democrats suffer the same fate.
The level of taxation necessary to pay for the profligate spending now taking place will have to be massive as anyone with a 5th grade education understands. But the Dems also understand that any taxation that takes place must be other than income taxes because it is important to maintain the mirage that “95% of all Americans” are getting tax cuts. That leaves “the rich”, corporations and smoke and mirrors.
The rich have been identified ($250k or more), corporations are on the block with much higher taxation in the offing. So the investor class and the engine of the economy are under assault. The smoke and mirrors show? Wait until health care and cap and tax trade hit. 100% of Americans will be paying large sums for both.
But back to the point – the deeper we get into the Obama administration, the more we come to understand how gullible a good portion of the American public appears to be. There is a certain level of satisfaction with the buyer’s remorse being seen among many of his supporters as they see what their vote has actually bought. I sure hope they don’t shop for other important items as badly as they apparently shop for presidents.