April 14, 2014

“Do liberals really think an 80% top tax rate wouldn’t hurt the US economy?”

Wait, is this a trick question?  Because my gut says, “uh, of course they don’t. Or rather, they don’t much care, as long as they can continue to write the tax laws that keep them flush — and then claim they’ve helped solve “income inequality,” as if all incomes should be the same, despite the amount of work, the kind of work, or the desire of the good or service.

Jim Pethokoukis:

Going forward, progressive economist and inequality researcher Thomas Piketty recommends a top rate of 80% in his new book “Capital in the Twenty-First Century,” a work much praised on the left. Clearly, then, tax rates could go a lot higher both to reduce income inequality and raise more dough for government spending programs, right?

Actually, it’s far from clear that we’re not already at Peak Tax, or at least near the summit. First, fiscal austerity last year was offset by monetary stimulus as the Federal Reserve embarked upon its bond-buying program.

Second, the top effective tax rate in the 1950s was closer to 50% because of tax loopholes in an economy experiencing some amazing one-off, postwar tailwinds. High-tax advocates like Piketty want to raise rates and get rid of loopholes, creating sky-high effective rates never before experienced in an advanced economy.

Third, high rates in states like California and New York mean “we might be pretty close to the revenue-maximizing tax rate,” Alan Auerbach, a center-left tax economist at the University of California, Berkeley, told the Wall Street Journal.

Fourth, estimates that sharply raising tax rates has little to no impact on taxpayer behavior completely ignore possible longer-term effects. What about all those folks who take risks and make career choices in hopes of striking it rich? “Significantly reducing that possibility by hitting those individuals with extremely high income taxes is of first-order importance in determining the optimal top tax rate,” AEI’s  Aparna Mathur, Sita Slavov, and Michael Strain argued in a paper last year.

Fifth, it’s not the just the 1% bearing a large share of the income tax burden. Citing the CBO, the WSJ notes that “the increase in the individual income tax burden borne by the top 20%—such as couples with two children making more than $150,000—has gone from 65% in 1980 to more than 90% as of 2010.”

Given an aging society, the US in the future will need to collect more revenue than the postwar average of 17.4% of GDP.  How much? Maybe at least a quarter more, and even that’s assuming smart entitlement reform. To do that without crippling growth, the US will need to shift from a progressive income tax to a progressive consumption tax. The US tax burden may be headed higher, but top income tax rates shouldn’t be.

Again, Pethokoukis makes his argument from the baseline assumption that the progressive left really wants a vibrant free-market economy.  They don’t.  They are radical egalitarians, which explains why they wish to remove loopholes, take from high wage earners, redistribute that money to their political clients — all while tearing down our energy grid, which in turn will stifle productivity in other ways and cause products and services to increase in price.

This, in turn, will lead to more layoffs, and so more clients for the welfare-pushing left.

It’s the road to serfdom that they’re after.  Because without serfs, you can’t really get to be part of an aristocracy that lords over them.

When we reach North Korean standards, they’ll be happy.  Because then they can, like, kill dissidents with flamethrowers and the like, or at least lock them away in gulags.  Like Bill Ayers wanted to do. Back before he was just some guy from Obama’s neighborhood, who launched his political career.

Purely coincidentally, of course.

Posted by Jeff G. @ 10:08am

Comments (7)

  1. Do liberals really think an 80% top tax rate wouldn’t hurt the US economy?

    They know it will.
    They want it to.
    It’s who they are.
    It’s what they do.

  2. All they think is that if a person earns $1 million and gets to to keep $200K of it, they still have more money than them.

  3. Saw a thing on PBS over the weekend where they did this experiment. Dude sat there with a dog and asked the dog to give its paw, which the dog did, and the experimenter rewarded him with a “good dog” every time. About 30 times.

    Then they brought in Dog 2, and the dude asked both dogs, side by side, for their paws, and they both presented them, but the second dog got a treat for it, whereas the first dog got “good dog” just as before.

    After a bit, Dog 1 stops producing his paw. He can see right there that Dog 2 is getting summat for his efforts and he ain’t, so why bother?

    The repeated that experiment with lots and lots of dogs and got the same result.

    Our mammal brains are no different.

  4. Cucumber vs. grape: thumos on show.

  5. McGehee wrote:

    Do liberals really think an 80% top tax rate wouldn’t hurt the US economy?

    They know it will.
    They want it to.
    It’s who they are.
    It’s what they do.

    Yet, when Senatrix Fauxahontas had the opportunity voluntarily to pay the higher Massachusetts state income tax rate, she declined.

    There’s some serious, serious! intellectual disconnect on the left. Not only do they think it won’t hurt the economy, they somehow don’t seem to realize that they’ll have to pay those higher taxes, too.

    The Wall Street Journal has pointed out the differences in growth between high-tax Illinois and it’s comparable neighbors, differences that we’ve been able to see for a while now, but the left still never listen.

  6. It is difficult (in the face of their performance) to believe any such thing as intellect, let alone a concomitant intellectual disconnect could exist on the political left, insofar as the political left is no more than human desire set loose from mind — Hobbes put it thus: ” . . . a perpetual and restless desire of power after power, that ceaseth only in death. And the cause of this is not always that a man hopes for a more intensive delight than he has already attained to, or that he cannot be content with a moderate power, but because he cannot assure the power and means to live well, which he hath present, without the acquisition of more. And from hence it is that kings, whose power is greatest, turn their endeavours to the assuring it at home by laws, or abroad by wars: and when that is done, there succeedeth a new desire; in some, of fame from new conquest; in others, of ease and sensual pleasure; in others, of admiration, or being flattered for excellence in some art or other ability of the mind. “

  7. they’ll have to pay those higher taxes, too.

    Taxes, like laws, are for the little people.

    The loopholes they close won’t be any they use.