Over the next week or so, I’ll be writing about liberalism’s ultimate myths. First up, the ‘tax the rich’ myth. This is a key concern because the leaders of the modern Left — Hillary Clinton, Sen. Bernie Sanders (I-Vt.) and Sen. Elizabeth Warren (D-Mass.) chief among them — promise constantly to make “the rich” pay “their fair share.” And on paper, this sounds great. After all, few among us would readily complain if the rich had their taxes increased and we got a more effective government and a healthy economy in the bargain.
Unfortunately however, this orthodox offering of American liberalism is disingenuous. All economic choices have consequences. And whatever liberals might claim, their “tax the rich” proposals would cause most harm to the poorest in our society. Again, on paper, it sounds great: taxing the person behind the tree, leads to a happier society for you and for me!
Ah, but there are many catches. For a start, who are “the rich”? Are the rich those who earn more than $1 million a year? Or $500,000 a year? Or $250,000 a year? I don’t know about you, but I would feel pretty “rich” if I was earning any of those salaries! Nevertheless, the simple truth is that when liberals talk about taxing the rich today, they’re often vague about specific income levels. Instead, they pretend they’re offering a zero-sum, win-win scenario in which higher taxes can be imposed without social costs. But in the 21st century, that just isn’t true.
Consider the recent experiences of Britain and France in raising taxes “on the rich” in order to bolster their public finances. Britain’s tax increase a few years ago, from 40 percent to 50 percent, generated minimal revenue, while discouraging UK-based wealth creation.
Similarly, punitive tax rates in France led to a massive flight of capital, and an ensuing collapse of foreign investment and domestic economic confidence. Everyone lost out — especially those who rely upon wealth investment for their jobs and flowing economic growth.
But there’s another catch here. As Thomas Sowell points out, “the rich” will find ways to move their resources away from tax-liable, but nationally economic-efficient areas.
Whatever liberals might claim, their “tax the rich” proposals would cause most harm to the poorest in our society
Still, even if punitive tax hikes on “the rich” cause broader economic harm, revenue generation is also a critically relevant concern for the non-rich rest of us. After all, if taxing the rich doesn’t raise a sufficient sum of money, government expenditures cannot be balanced and the deficit will spiral out of control. And that’s a big problem when you consider that Hillary Clinton, for example, is proposing over $1 trillion* in new spending over 10 years. It’s a big problem because the middle class will have to help carry the new taxes to cover this profligacy. Don’t believe me? Read how Hillary Clinton herself hedged on middle class tax increases last weekend. When an American politician refuses to rule out higher taxes, she’s probably going to raise taxes.
Regardless, pretending the rich can pay for everything is mathematical nonsense. Moreover, America already has one of the most progressive tax systems in the world. Consider the fact that the top 10 percent of American earners already account for more than 70 percent of all income tax revenue. Pushing taxes too high will simply push higher-earners to relocate their wealth — and taxes — to more tax-friendly shores abroad.
In the end then, what this comes down to is two basic questions of math and means. On the first count, math, it is simply untrue to suggest that the rich can pay for a big government alongside economic growth. All of us have to cover the bill of higher spending and all of us ultimately suffer from the costs of government redistribution. As an extension, all Americans — rich, middle-income or poor — thus face a simple question: do we believe the government knows how to spend our money better than we do?
*Whatever politicians say they’ll spend, multiply by three!
Tom Rogan is a contributor for Opportunity Lives and writes for National Review. He is a panelist on The McLaughlin Group and a fellow at the Steamboat Institute. Follow him on Twitter @TomRtweets.