Six Myths Explained About Taxing The Wealthy

Six Myths Explained About Taxing The Wealthy

On Saturday, the Obama administration unveiled the "Buffett Rule [1]," a proposed tax on millionaires and billionaires named after celebrity investor Warren Buffett, who has long argued that the federal government should demand more of the wealthy. The millionaires tax is certain to become a major point of contention in the 2012 presidential campaign, and Republicans have wasted no time in heaping it with calumnies. Here are the six most popular conservative arguments against a progressive tax code, and why they're wrong:

It's class warfare! [2]
Yeah right. Three decades of laissez-faire economic polices have allowed the rich to double their share of the national income while paying tax rates a fifth lower than before. The result, notes Kevin Drum [3], was "wage stagnation for everyone else, a massive financial collapse that ravaged the middle class, an enormous deficits that they'll be asked to pay off eventually." If the millionaires tax is the only blowback, the wealthy should count their blessings.

It's a tax on small business [4]
"Don't forget that most small businesses file taxes as individuals," House Budget Committee Chairman Paul Ryan (R-Wis.) said on Fox News Sunday. "So when you are raising top tax rates, you are raising taxes on these job creators." Except when you aren't. ThinkProgress's Pat Garofalo points out [5] that fewer than 2 percent of the nation's small businesses fall into either of the top two tax brackets. Plus, many of the small business filers in the upper brackets are merely investors who have nothing to do with running the business. And if small businesses don't want to pay taxes as individuals, they can file as corporations.

It reduces incentives to work and invest [6]
Experience shows otherwise. As Nancy Folbre points out [7] over at Economix, "average annual rates of growth in gross domestic product in the high tax era between 1950 and 1980 exceeded those of the last 30 years. Increases in the top tax rate under President Bill Clinton were followed by robust economic expansion."

It's an unstable source of revenue [8]
A recent essay [8] in the Wall Street Journal argued that the high volatility of upper-level income makes it impractical to rely on taxing it. But this concern is vastly overblown [9] and can be easily dealt with by establishing rainy day funds.

It's unfair [10]
In the libertarian view, the rich are entitled to their gains because they worked for them. But this ignores how structural changes in the economy such as globalization, financial deregulation, and the rise of the knowledge-based economy have disproportionately rewarded the wealthy [11]. At the same time, we've failed to reinvest in government programs that once leveled the playing field, such as financing for community colleges and public universities [12].

The rich will leave the country [13]
Good riddance, writes [14] Don Peck in a recent Atlantic essay on how to save the middle class: "America remains a magnet for talent, for reasons that go beyond the tax code; and by international standards, none of the tax changes recommended here would create an excessive tax burden on high earners. If a few financiers choose to decamp for some small island-state in search of the smallest possible tax bill, we should wish them good luck."
Source URL: http://motherjones.com/mojo/2011/09/6-dumb-arguments-against-taxing-rich-explained

Links:
[1] http://www.nytimes.com/2011/09/18/us/politics/obama-tax-plan-would-ask-more-of-millionaires.html?pagewanted=2
[2] http://www.outsidethebeltway.com/obamas-millionaires-tax/
[3] http://motherjones.com/kevin-drum/2011/09/paul-ryan-insults-our-intelligence-yet-again
[4] http://www.foxnews.com/on-air/fox-news-sunday/2011/09/18/rep-paul-ryan-rips-obamas-jobs-plan-herman-cain-defends-his-999-tax-proposal
[5] http://thinkprogress.org/economy/2011/09/19/322193/small-business-taxes-lies/
[6] http://spectator.org/blog/2011/09/18/thoughts-on-obamas-buffett-rul
[7] http://economix.blogs.nytimes.com/2011/04/11/taxing-the-rich/
[8] http://online.wsj.com/article/SB10001424052748704604704576220491592684626.html
[9] http://www.remappingdebate.org/article/wsj-story-exaggerates-price-taxing-rich-cherry-picks-data
[10] http://reason.com/archives/2010/09/30/taxing-the-rich
[11] http://motherjones.com/politics/2011/02/income-inequality-labor-union-decline
[12] http://motherjones.com/mojo/2011/09/why-expanding-colleges-wont-fix-income-inequality
[13] http://www.ronpaulforums.com/showthread.php?193824-Maryland-Tax-Raise-Backfires-When-Millionaires-Flee
[14] http://www.theatlantic.com/magazine/archive/2011/09/can-the-middle-class-be-saved/8600/?single_page=true

Perhaps the biggest myth surrounding the wealthiest 10% of U.S. citizens is that they are the "producers". Most of us have little problem with a business owner taking large compensation if earnings are high. Yet those owners and everyone else needs to keep one fundamental fact in mind - all capital starts with and is perpetrated by some doing some labor - in modern times that means making a product or providing a service. Take away labor and those so-called producers are just people with day dreams. The wealthy and conservatives especially have gotten very arrogant about how valuable they are. They'll be shocked to find that if they packed and moved to some no tax island tomorrow not only will America survive, we'll be better off without them.

The Desperate Mitt Romney Tells Lies About President Obama Instead of Attacking His Sleazy Opponent Newt Gingrich. No Wonder Mitt is Falling in The Polls

The Desperate Mitt Romney Tells Lies About President Obama Instead of Attacking His Sleazy Opponent Newt Gingrich. No Wonder Mitt is Falling in The Polls

Here's something Mitt Romney is being firm and consistent on: lying about the Obama administration's record on regulations. Monday in New Hampshire, Romney said:

    The level of regulation in America, every the regulators, the government, come up with new regulations. And they send them out. The rate of regulatory burden has increased four-fold since Obama has become president. Four times the amount of regulation coming out per year as in the past. And so businesses say, ‘gosh, I’m not sure I want to invest in America.’

Of course, both the claim about the increase in regulation under Obama and the claim about the resulting effect on business are false, but it's not the first time Romney has gone there. Think Progress takes us through the sorry history:

    When Romney made the same claim during an interview with NPR in September, NPR asked the Romney campaign for verification, at which point the campaign was forced to admit that “the Governor misspoke.”

    Instead, the Romney camp told NPR that new regulations under Obama are twice what they were under President George W. Bush. Trouble is, that’s not true either, as Bloomberg News pointed out:

        Obama’s White House approved 613 federal rules during the first 33 months of his term, 4.7 percent fewer than the 643 cleared by President George W. Bush’s administration in the same time frame, according to an Office of Management and Budget statistical database reviewed by Bloomberg.

    Later on during the event, Romney claimed that, according to an official government report, regulations costs the U.S. economy $1.7 trillion annually.

You guessed it: That's not true either. Just a fraction of a percent of layoffs have been attributed to regulation under Obama, and more than one study, including an OMB estimate, have found that the economic benefits of major regulations outweigh their costs, sometimes by a large margin. Never mind that regulations keep us safe on the job and give us clean air to breathe and clean water to drink. But while the specific numbers Romney spews on this will probably change, I think we can count on him to be unwavering and neither flip nor flop in his basic commitment to falsehood.

I'm not sure how simply repeating the word regulation over and over again became an attack tool by elitist conservatives. You have rules for your kids so they do not misbehave. Regulations are just rules for business so they don't misbehave or they at least do so less often. Mining regulations save miners' lives - when mining companies adhere to them. You think driving on our highways is dangerous now, try scraping the regulations and see how safe it is simply to get from point A to Point B. Conservatives continue to deal with problems with childish and simplistic answers to complex problems. Not one of them should be reelected until the conservatives movement grows up and becomes responsible adults.