War on the Rich
It’s easy to pick on the rich. There really aren’t that many of them for one thing, and since they’re not considered a minority they aren’t granted the protected status that decency gives to other minority groups. They’re still fair game, and it seems like a lot of people are taking advantage of that fact. Now, a vote in the Senate designed to put Republicans in a corner is being a bit misrepresented by the pundits.
For example, from the Washington Post’s Greg Sargent:
So it’s come to this. Republican opposition to any kind of revenue increase as part of the deficit deal has grown so implacable that Dems will now hold a Senate vote tomorrow on the basic idea that millionaires and billionaires should help contribute to fixing our deficit.
It’s not a vote on any specific proposal to hike taxes or end tax breaks. Rather, it’s a vote that puts each Senator on record on the general question of whether the rich should sacrifice in sevice of deficit reduction.
[Bold emphasis is mine]
What’s the problem with this one? Simple…the rich already “sacrifice in service of debt reduction”. They pay taxes. In fact, they pay a significant percentage of the taxes paid by Americans. They sacrifice already, but you wouldn’t get that with comments like that, would you?
The truth is, Sargent should know better. Later on in the same piece:
In a column at the New York Post, Dan Mitchell explains that soaking the rich in taxes will hit hurt the middle class:
The Obama administration’s approach is to look at tax policy mainly through the prism of class warfare. This means that some of the 2001 and 2003 tax cuts can be extended, but only if there is no direct benefit to anybody making more than $200,000 or $250,000 per year.
That’s bad news for the so-called rich, but what about the rest of us? This is why the analysis about direct and indirect costs is so important. The folks at thepresumably hope that we’ll be happy to have dodged a tax bullet because only upper-income taxpayers will face higher direct costs.
But it’s the rest of us who are most likely to suffer indirect costs when higher tax rates on work, saving, investment and entrepreneurship slow economic growth. When the economy slows, that’s bad news for the middle class — and it can create genuine hardship for the working class and poor. Indeed, punitive taxation of the “rich” is one reason why middle-class people in high-tax European welfare states have lost ground in recent decades compared to Americans.
The White House may be playing smart politics by engaging in class warfare, especially if succeeds in blaming the recession on tax cuts that took place five years before the downturn began. But for those who care about prosperity more than politics, what really matters is that the economy is soon going to be hit with higher tax rates on productive behavior.
With the economy expected to continue its sluggish pace as we head into 2011, some economists believe that the expiration of the Bush tax cuts will hurt the economic recovery:
The nascent US economic recovery would be halted in 2011 if Congress fails to extend the Bush tax cuts for the wealthiest Americans, analysts at Deutsche Bank said.
The cuts were enacted in 2001 and 2003 under President George W. Bush and covered those earning more than $250,000, but they are set to expire at the end of this year.
Deutsche said the drag on gross domestic product should they lapse could be as much as 1.5 percent, with the more likely impact at 1.1 percent.
The impact would be worse, the analysts said, if Congress fails to fix the Alternative Minimum Tax, which was enacted in 1969 to make sure rich people pay taxes but was never indexed for inflation, and thus is now hitting middle-income workers.
“In a worst-case scenario, allowing the Bush tax cuts to expire and failing to fix the AMT could result in (1.5 percent) of fiscal drag in 2011 on top of the 1 percent fiscal drag we expect to occur as the Obama fiscal stimulus package unwinds,” Deutsche said in a note to clients. “If the recovery remains soft/tentative through early next year, this additional drag could be enough to push the economy to a stalling point.”
Deutsche compared the situation to Japan in the 1990s, when the government let tax cuts expire and cut stimulus, leading to another leg down in the recession and ensuring the nation’s “lost decade” of no economic growth.
As the debate over the extention of the Bush tax cuts heats up, with Obama Administration officials foolishly saying that their expiration will have no impact on a fragile economy, Dan Mitchell points out that the working class, lower and middle income earners, will be causualities of the War on the Rich:
Unfortunately, the Obama Administration’s approach is to look at tax policy only through the prism of class warfare. This means that some tax cuts can be extended, but only if there is no direct benefit to anybody making more than $200,000 or $250,000 per year. The folks at the White House apparently don’t understand, however, that higher direct costs on the “rich” will translate into higher indirect costs on the rest of us. Higher tax rates on work, saving, investment, and entrepreneurship will slow economic growth. And, because of compounding, even small changes in the long-run growth rate can have a significant impact on living standards within one or two decades. This is one of the reasons why high-tax European welfare states have lost ground in recent decades compared to the United States.