Milking the rich is not the solution
August 24, 2011
Regarding Melanie Sturm’s “chicken story” column (“Class warfare divisive and un-American,” Aug. 4, 2011, The Aspen Times):
After Sturm’s column, a Warren Buffet piece appeared in The New York Times urging more soaking of high incomes. Buffet, having made tons of money, uses support for the prevailing party (Democrat) to curry favor, knowing he personally won’t suffer; his bundle is safely parked in tax-exempt foundations and Berkshire Hathaway, where it will avoid personal taxation unless he sells his shares. He can decide when/whether to sell those shares, depending on the tax he’d have to pay on the gain (foundations aren’t taxed, by the way).
Contrast these columns. The Sturm column argued cogently based on data, while the Buffet column argued based on feeling. Oh, Buffet threw in his hokey anecdote about how much higher a tax rate his secretary pays than he does. But that is not data; it is argument parading as data.
Buffet earns dividends and capital gains, taxed at low rates to encourage capital formation. We need a lot of that to grow and pay for the enormous Social Security, Medicare and ObamaCare liabilities that soon will swamp us. Before there are dividends or capital gains, however, Buffet’s investments pay corporate income taxes of about 35 percent (federal and state).
Buffet’s income is the residue after the economic earnings have been heavily taxed. Combining personal and corporate taxes, the economic income has been taxed at 50 percent or more, leaving only 50 cents for the investor to reinvest or spend. Why does Buffet omit that info? Because such an inconvenient truth destroys his argument?
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Moreover, Buffet never donated, nor urged other billionaires to donate, anything to the IRS’s national debt retirement fund. Not a dollar. But he preaches that others should pay more taxes, possibly for the reasons posited here. By omitting a key fact and through “do as I say, not as I do” behavior, he shows his hand and destroys his credibility. He is a stock guru, not a tax policy guru.
The Sturm column, in contrast, summarizes data that the feds spend over 24 percent of GDP, would spend more, and crowd out much of the private sector. Where will the feds get the money? Only from borrowing (if borrowing is permitted to continue); the constant “tax the rich” drive will smother capital formation, but create a European-
pattern, no-growth economy. Spend 24 percent or more of GDP, and we will, believe it or not, be Greece or Italy or even England.
The feds cannot expect to get the money by raising tax rates. Since World War II, no matter how high or low tax rates have been, the aggregate economy hasn’t given up more than 18 percent of GDP in federal taxes.
Well, why don’t we “temporarily” grab some more of the high incomes to pay debt? Because there isn’t enough money even there. It would require taking all the income of everyone making over $200,000 a year to make up one year’s deficit, without paying any debt. This might happen once, since no one would ever work again after their earnings had been confiscated.
But facts and data are not relevant to the “tax the rich” crowd. The reason for agitation to take more chickens from those who have them is social, not economic. The progressive religion demands chicken equality at any cost, even if the result is no chickens. Progressives know or care little about the economic consequences, especially depressed incentives to invent and produce that would harm all of society. One can throw up (get it?) all the numbers possible and it won’t change their religion.