A certain retarded clown* is calling for raising taxes onthe rich:
Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today.
Of course, this claim is patently untrue. It’s like Krugman just makes up facts to suit
his fancy.
Along the way, however, we’ve forgotten something important — namely, that economic justice and economic growth aren’t incompatible. America in the 1950s made the rich pay their fair share; it gave workers the power to bargain for decent wages and benefits; yet contrary to right-wing propaganda then and now, it prospered. And we can do that again.
Now, I’m no apologist for rich people, especially since a
lot of them benefit from and continuously lobby for greater government
goodies. However, Krugman’s argument for
increasing income taxes on the rich is nothing more than nonsense on stilts.
In the first place, a good number of wealthy people don’t
actually get wealthy strictly through income.
Instead, they rely on capital gains from their investments. Warren Buffett doesn’t actually make billions
of dollars every year; rather, he becomes wealthier because his holdings
increase in value. In fact, Warren Buffett’s salary is only around $100,000 per year (though he does earn more
than this due to having other sources of income). If he stuck solely with his
Berkshire-Hathaway salary, he would fall squarely in the middle tax bracket. His
proposal for increasing income taxes on the wealthy, then, wouldn’t even apply
to him.** Thus, Krugman’s call for
increasing the marginal tax rate on the wealthy might not even have any effect
on the wealthy because some of the wealthy aren’t even in the highest tax
bracket.
Second, it isn’t even clear that the tax code is good at
providing economic justice. As noted in
a prior link, the wealthy never really paid that much in taxes even when the
marginal rate was 91%. Now, if the
effective rate of taxation for the highest tax rate tops out at, say, 35%, then
there really is not much point to having a nominal rate higher than 35%, except
to make less wealthy people that are inclined to jealousy feel better about
sticking it to the man. In other words,
Krugman is more concerned about symbolism than reality. Who cares what the rich actually pay when it appears
that they are paying 91% of their income in taxes.*** Of course, closing deduction loopholes for
those in the highest tax bracket would also increase their tax burden. Why doesn’t Krugman recommend this
policy? Because Krugman is far more
concerned about symbolism over substance and, quite simply, raising rates is
sexier than closing off loopholes.
Really, Krugman is nothing more than an instigator of class warfare.
Finally, it should be noted that the fundamental purpose of
taxation is to raise revenue. Economic
justice and other platitudinous bullshit can certainly be ancillary to this,
but revenue should be the primary focus of any discussion on taxes. Now, as anyone familiar with the Laffer Curve
knows—and hopefully this would include Nobel-Prize-winning economists—raising
nominal tax rates does not necessarily lead to increased revenue. In fact, a brief look at the history of tax revenue would suggest that, no matter what the tax rates are, the federal government
will be hard-pressed to collect more than 20% of GDP in tax revenue. As such, proposing ridiculously high tax
rates even though they will likely lead to lower revenue in spite of being in
the middle of a recession and facing a spending deficit of over $1 trillion is
an incredibly irresponsible thing to do.
* Paul Krugman, obviously.
** Note: as I said above, he does earn more than $100k in a
given year. However, the sources of his
other earnings are unclear, so I’m not sure if they would all be taxed as
income or possibly as capital gains, etc.
*** And, with the US tax code using marginal tax rates, the
nominal 91% rate for the highest earners is itself misleading, since the 91%
rate would apply to earnings over a certain threshold. (E.g. you could have a
10% tax rate on the first $60k you earn and then have a 91% tax rate on all
earnings above $60k, which makes for an effective tax rate of less than 91%).
