News & Politics

One Thing That Gets Overlooked Amid Calls for 'Taxing the Rich'

(AP Photo/Susan Walsh, File)

I thought that with a Republican in the White House — a particularly wealthy Republican at that — the administration wouldn’t be looking at taxing the rich. After all, that’s a shibboleth of the left — not the right. And with Trump in power, what are the odds that his administration would call for raising his taxes or the taxes of his family?

However, it looks like former Trump advisor Steve Bannon was talking about doing just that. (Update: “Trump: We must fix our self-destructive tax code.”)

The folks at The Federalist Papers were understandably less than thrilled with that concept of taxing the rich more.

Traditional conservatism recognizes certain fundamental principles of politics and economics, and those principles are not abandoned when someone on “our team” proposes an idea that runs contrary. A consistent conservative will strongly oppose this idea no matter who makes the proposal.

This idea is foolhardy and rampant with economic illiteracy. “Economic nationalism” does not eliminate or override the laws of economics. Whether taxes are increased in the name of the USA or in the name of Social Justice, the outcome is the same.

As famous economist Henry Hazlitt wrote about the effect of increased personal taxes in Economics in One Lesson:

People begin to ask themselves why they should work six, eight or nine months of the entire year for the government, and only six, four or three months for themselves and their families. If they lose the whole dollar when they lose, but can keep only a fraction of it when they win, they decide that it is foolish to take risks with their capital. In addition, the capital available for risk-taking itself shrinks enormously. It is being taxed away before it can be accumulated. In brief, capital to provide new private jobs is first prevented from coming into existence, and the part that does come into existence is then discouraged from from starting new enterprises.

A tax hike on anyone is a foolhardy idea, and conservatives know better than to support something like that. President Trump has expressed support for such tax hikes in the past, but he must resist the temptation to do so now that he is in office.

However, there’s something that gets missed in these discussions much of the time — and that’s just how useless it is.

Breitbart reported:

Raising the top rate would also not necessarily raise taxes on many Americans. For example, a tax plan that included a 44 percent rate on income over $1 million but compressed the current brackets from seven to four by lowering the 15 percent bracket to 10 percent, the 33 and 28 percent brackets to 25 percent, and lowering the current 39.6 percent to 35 percent, would very likely lower the effective tax rate on nearly everyone.  That’s because the bulk of income would be taxed at the lower rates, with the new top rate applying only to income above the $1 million mark.

No matter how wealthy a person is, his wealth won’t make nearly the dent some like to think. If you take every penny that Jeff Bezos, the founder of Amazon, has and distribute it among the poor, it won’t make much of a difference. Bezos was briefly the richest man in the world, with his net worth topping $90 billion. There are 45 million people living below the poverty line. If you took every penny Bezos had and gave it to those people, they’d each get about $2,000. If the government or a private charity was in charge of distributing those funds, that amount would be reduced somewhat as that agency would have operating costs.

Now, take the slight bump on the wealthiest Americans’ tax rate and recognize that it won’t even be that effective, regardless of what it’s used for. There are a lot of people who make far less than $1 million a year, and since federal revenue is unlikely to actually increase under such a scheme, all that could be accomplished is political theater.

Frankly, Congress and the president would be better served by doing nothing on taxes. They should focus on cutting actual spending instead. While I and many other Americans would welcome a tax cut, it does no one any good to cut our taxes while strangling the economy and keeping a morbidly obese federal budget rolling along.