Tax the rich: Should millionaires really pay more?
The fight over raising levies on the wealthy, a theme of the 'Occupy Wall Street' protests, is about more than money. It's a clash over fundamental American values.
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On the other hand, advocates of taxing the rich counter that a trillion dollars would contribute a lot to solving the problem and, if you extended the increased levies to a larger segment of the rich – or even put a tax on wealth instead of just on personal income, as some economists advocate – the revenues would be even more substantial.Skip to next paragraph
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Still, conservatives believe that taxing the rich is tantamount to punishing – and thereby discouraging – the wealth-creating behavior of a nation's most industrious citizens. Many cite a tenet of supply-side economics: the enduring notion that prosperity in upper income brackets helps the less fortunate, too, through job creation and investments that bolster the economy. If the rich are taxed excessively, the theory goes, those benefits will stop flowing.
"There are clearly economic costs associated with taxing this group," adds Alan Viard, a former senior economist at the Federal Reserve Bank of Dallas and a resident scholar at the conservative-leaning American Enterprise Institute. "We will trigger more tax avoidance by them, and we do have the potential to undermine saving and investment."
Grover Norquist, the father of Republican tax policy, has rallied legislators behind these arguments and others. Of the 292 Republicans in Congress, all but 13 have signed a pledge committing to oppose "any and all tax increases." That pledge is circulated by Mr. Norquist's advocacy group, Americans for Tax Reform.
In a recent interview with The Christian Science Monitor, Norquist said, "Obama promised you recovery. He didn't get you recovery. He made things worse." Norquist next compared the president to Joseph Stalin, saying:
"So it's somebody else's fault. 'Get the Kulaks!' The Kulaks were wealthy peasants that Stalin had murdered by the hundreds of thousands. He ran a campaign saying 'Are you not doing well? Are you starving to death? Oh, it's those wealthy Kulaks. Get them!' It distracts people from who's responsible. He's responsible for the problem. Not the Kulaks. And dividing the country against each other to distract people from the failure of leaders is the kind of thing that we expect people to do in other countries that wear funny uniforms. We do not expect that from Americans. I mean, it's repulsive."
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Even when such arguments are put in tamer terms, not everyone sees the wealthy as potential victims. "The explosion of the debt bubble and the excesses of Wall Street hurt most Americans terribly," suggests Reich. "Rarely before in American history has the public seen so blatantly how the predations of a very rich and powerful minority at the top can hurt so many."
Reich and others like to note that 23 million jobs were created under President Bill Clinton, who raised taxes and left a surplus, while only 3 million were created under President George W. Bush, who lowered taxes while leading the country into debt and two wars. They point out that, according to the Internal Revenue Service, the 400 wealthiest Americans paid on average only 18 percent in income taxes in 2008, the latest year for which data is available.