It’s hard to keep track of all the tax hikes that President Obama is proposing, but it’s very simple to recognize his main target – the evil, nasty, awful people known as the rich.
Or, as Obama identifies them, the “millionaires and billionaires” who happen to have yearly incomes of more than $200,000.
Whether the President is talking about higher income tax rates, higher payroll tax rates, an expanded alternative minimum tax, a renewed death tax, a higher capital gains tax, more double taxation of dividends, or some other way of extracting money, the goal is to have these people foot the bill for a never-ending expansion of the welfare state.
This sounds like a pretty good scam, at least if you’re a vote-buying politician, but there is one little detail that sometimes gets forgotten. Raising the tax burden is not the same as raising revenue.
That may not matter if you’re trying to win an election by stoking resentment with the politics of hate and envy. But it is a problem if you actually want to collect more money to finance a growing welfare state.
Unfortunately (at least from the perspective of the class-warfare crowd), the rich are not some sort of helpless pinata that can be pilfered at will.
The most important thing to understand is that the rich are different from the rest of us (or at least they’re unlike me, but feel free to send me a check if you’re in that category).
Ordinary slobs like me get the overwhelming share of our income from wages and salaries. The means we are somewhat easy victims when the politicians feel like raping and plundering. If my tax rate goes up, I don’t really have much opportunity to protect myself by altering my income.
Sure, I can choose not to give a speech in the middle of nowhere for $500 because the after-tax benefit shrinks. Or I can decide not to write 
an article for some magazine because the $300 payment shrinks to less than $200 after tax. But my “supply-side” responses don’t have much of an effect.
For rich people, however, the world is vastly different. As the chart shows, people with more than $1 million of adjusted gross income get only 33 percent of their income from wages and salaries. And the same IRS data shows that the super-rich, those with income above $10 million, rely on wages and salaries for only 19 percent of their income.
This means that they – unlike me and (presumably) you – have tremendous ability to control the timing, level, and composition of their income.
Indeed, here are two completely legal and very easy things that rich people already do to minimize their taxes – but will do much more frequently if they are targeted for more punitive tax treatment.
1. They will shift their investments to stocks that are perceived to appreciate in value. This means they can reduce their exposure to the double tax on dividends and postpone indefinitely taxes on capital gains. They get wealthier and the IRS collects less revenue.
2. They will shift their investments to municipal bonds, which are exempt from federal tax. They probably won’t risk their money on debt from basket-case states such as California and Illinois (the Greece and Portugal of America), but there are many well-run states that issue bonds. The rich will get steady income and, while the return won’t be very high, they don’t have to give one penny of their interest payments to the IRS.
For every simple idea I can envision, it goes without saying that clever lawyers, lobbyists, accountants, and financial planners can probably think of 100 ways to utilize deductions, credits, preferences, exemptions, shelters, exclusions, and loopholes. This is why class-warfare tax policy is so self-defeating.
And all of this analysis doesn’t even touch upon the other sure-fire way to escape high taxes – and that’s to simply decide to be less productive. Most high-income people are hard-charging types who are investing money, building businesses, and otherwise engaging in behavior that is very good for them – but also very good for the economy.
But you don’t have to be an Ayn Rand devotee to realize that many people, to varying degrees, choose to “go Galt” when they feel that the government has excessively undermined the critical link between effort and reward.
Indeed, if Obama really wants to “soak the rich,” he might want to abandon his current approach and endorse a simple and fair flat tax. As explained in this video, this pro-growth reform does lead to substantial “Laffer Curve” effects.
But you don’t have to believe the video. You can check out this data, straight from the IRS website, showing how those evil rich people paid much more to the IRS after Reagan cut their tax rate from 70 percent to 28 percent in the 1980s.
When Obama says it’s not “Class Warfare” he is exactly correct. For there to be “Warfare” both side have to fight, and in Obama’s America, entrepreneurs don’t fight the US government, we just quit.
The good news is that the idea of America escaped the country’s geographical boundaries before the Left killed it–and all over the world it is bringing humans out of the degrading poverty that has been the norm throughout history.
For all of you, like me, who gain great joy from building a business that creates economic value for its workers, customers and investors, I invite you to move. Get out of the USA before these people suck the spirit from your soul. Trying to “save” the US from its chosen suicidal self-indulgent path is as useless as pleading to persuade a bottle out of the hands of a drunk. It is wasteful of your life energy, disasterously enabling, and in so doing you are denying your talents and training to the non-Americans who need it, want it and will benefit from it.
If you want to build a business, you can still change people’s lives for the better, just not in the U.S.
Get out while you can.
Attention President Obama: the way to really soak the rich is through a “wealth tax.” Our delightful gallic friends have had such a TAX for years. In 2012, the maximum French wealth tax will be 0.5%, not really that much. If your wealth is 1 billion euros, you’ll pay a paltry 5 million euros.
The wealthiest folks in the USA (defined as those with household net worth of 1 million dollars or more) were estimated by Deloitte & Touche to have total net worth of 38.6 trillion dollars. (See HERE.) A 1% wealth tax on them would yield 386 billion dollars, 2% 772 billion etc. And if the wealthy want to flee to another country, impose an “exit tax” just like the French.
Anyone second this suggestion?
So by this rationale, when Bush lowered the rates govt revenues increased? Are there data to support that?
Even if one subscribes to the class warfare philosophy — whereby the rich are a small group of undeserving people whose privileged status cannot be unseated due to inertia, conspiracies etc. — a better measure of “evil” is not how much one earns but how much one spends.
A person who earns a lot but spends little is essentially a good Samaritan. He basically works a lot but does not “cash in” the rewards of his labor (whether that labor is actual labor, high value work, unique investment intuition – i.e. unique ability to efficiently allocate capital whether acquired or innate etc.). By not spending his earnings he is essentially re-allocating immediately his deferred compensation to mechanisms that provide compensation to other people (i.e. investments). He is only “evil” to the extent that he MAY one day exercise his option (his earned right, really) to spend sometime in the future. Until he actually does spend (and thus allocates the fruits of his work not to what is economically efficient investment but to what he personally and whimsically desires) he has not committed “evil” — even by Marxist terms.
Warren Buffet, obviously does not intend to spend a significant portion of his money before he dies, neither plans to leave a significant portion of the wealth to his heirs. Nonetheless, he paradoxically insists on managing that wealth by himself and allocating it to the private sector rather than surrendering it to government management (i.e. loosely speaking to collective management by the people) in the form of taxation. Because nothing prevents Mr. Buffet from donating a portion of his wealth to the government — in the form of voluntary taxation. Which brings to light what Warren Buffet really thinks about the efficiency and utility of how the government (loosely speaking the people) will collectively manage his money.
So here is the link Mr. Buffett,
http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm
…could you please demonstrate to us how much more efficient you believe the government is in managing the portion of your wealth that you intend to neither spend nor pass on to your heirs?
Neither will a tax on the rich (even if behavior modification is discounted) raise anything more than a few tenths of billions. But as Mr. Mitchell has correctly pointed out, such a tax is a necessary pretext to wider swaths of the population acquiescing to higher levels of taxation. Other countries have shown that it is possible to collect large percentages of GDP in taxation and that is indeed the inevitable result, and probably desire, of Hope N Change. But the completion of that dream will accomplish little more than setting the US on the same perpetual 1%-2% growth trendline that these other high-tax nations are bound to. Such low average growth in a world that is poised to grow 4-5% per year on average, is a deterministic path to economic extinction within a couple of short decades.
All this, of course, if the dream of Hope N Change is completed before the decline, which is very unlikely and thus will provide the necessary pretext for Progressives to blame the decline on not enough Hope N Change.
If people recognized the reasons for their decline, Democracies would never decline. Alas…
It’s absurd to present logical arguments, like in this article, as a response to this kind of warfare. This “proposal” is not intended for logical arguments. It’s only intended to appeal to emotions, naturally for the left, but also for some of the gullible independents. The way to fight this sort of thing is NOT with logic, but with ridicule, etc.
I fall in to the category described, the rich, nasty awful rich, even though I make significantly less than $1,000,000 per year. I already pay about 50 cents on the dollar for federal, state and local taxes. I am a physician with a large debt load from school and large malpractice premiums. I have a wife and 4 children to raise. I sat next to people in high school and college who had the same opportunities as me, could have made the same decision to become a doctor but chose not to. I did because I was raised to be the best you can be, encouraged to be a professional and contribute to society. I paid for everything myself, college and medical school, as my parents could not afford to. Now I am the devil. Now those people who sat next to me in high school and college think I should subsidize their laziness….sounds fair, NOT! This attitude breeds mediocrity and is not the America I remember growing up. Sad.
[...] One Simple Reason (and Two Easy Steps) to Show Why Obama’s Soak-the-Rich Tax Hikes Won’t Work «… [...]
[...] More recently, I’ve explained why Obama’s class-warfare tax policy is especially misguided because of Laffer Curve effects. [...]
[...] More recently, I’ve explained why Obama’s class-warfare tax policy is especially misguided because of Laffer Curve effects. [...]
Sadly, even if the national (not federal ) government took ALL of the income of the millionaires and billionaires it would not cover all of the deficit for this year’s Obamabudget. And what are the odds that the millionaires and billionaires would hang around next year to let them do it again?
[...] and small business owners probably won’t generate much tax revenue because of incentives (and ability) to reduce taxable [...]
[...] tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities [...]
[...] tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities [...]
[...] tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities [...]
[...] tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities [...]
[...] tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities [...]
[...] In other words, government spending undermines growth, and the damage is magnified by a poorly designed tax policies. [...]
[...] In other words, government spending undermines growth, and the damage is magnified by poorly designed tax policies. [...]
[...] But then I came to my senses. It seems that many of the statists I debate and deal with support punitive taxation for reasons of spite and envy. As such, they don’t really care about the impact on either the economy or tax revenues. [...]
[...] tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities [...]
[...] But it’s also because Laffer Curve effects are very powerful at higher income levels. Simply stated, rich taxpayers usually have much more control over the timing, level, and composition of their incom…. [...]
[...] But it’s also because Laffer Curve effects are very powerful at higher income levels. Simply stated, rich taxpayers usually have much more control over the timing, level, and composition of their incom…. [...]
[...] I will make one correction to his rant. He says that middle-income people have the same deductions that are available to rich people. That’s not really true. Rich people, as I have explained before, don’t rely on wage and salary income like the rest of us. Instead, they earn capital income and business income, which opens the door to a much larger degree of tax pl…. [...]
[...] and small business owners probably won’t generate much tax revenue because of incentives (and ability) to reduce taxable [...]
[...] I’ve explained that it is silly for Obama and others to think it is easy to squeeze more money from rich taxpayers, and I’ve also provided evidence from the 1980s to show that upper-income people have considerable ability to respond to changes in tax rates by shifting the timing, level, and composition of their income. [...]
[...] I’ve explained that it is silly for Obama and others to think it is easy to squeeze more money from rich taxpayers, and I’ve also provided evidence from the 1980s to show that upper-income people have considerable ability to respond to changes in tax rates by shifting the timing, level, and composition of their income. [...]
[...] In other words, government spending undermines growth, and the damage is magnified by a poorly designed tax policies. [...]
[...] if a tax increase imposes a lot of damage and taxpayers have enough flexibility in their financial affairs, then it’s possible that a tax hike can lose revenue (or, as we saw with Reagan’s [...]
[...] people, unlike the rest of us, have tremendous ability to change the timing, composition, and level of their income, which is a big reason why upper-income taxpayers paid much more to the IRS in the 1980s after [...]
[...] people, unlike the rest of us, have tremendous ability to change the timing, composition, and level of their income, which is a big reason why upper-income taxpayers paid much more to the IRS in the [...]
[...] tax rates increase, sometimes people engage in tax avoidance, lowering their tax liabilities [...]
[...] tax rates increase, sometimes people engage in tax avoidance, lowering their tax liabilities [...]
[...] if a tax increase imposes a lot of damage and taxpayers have enough flexibility in their financial affairs, then it’s possible that a tax hike can lose revenue (or, as we saw with Reagan’s “tax cuts [...]
[...] I’ve explained that it is silly for Obama and others to think it is easy to squeeze more money from rich taxpayers, and I’ve also provided evidence from the 1980s to show that upper-income people have considerable ability to respond to changes in tax rates by shifting the timing, level, and composition of their income. [...]
[...] stated, there aren’t enough of the “1 percent.” Moreover, rich people have significant control over the timing, composition, and level of their income, so class-warfare tax hikes inevitably will fail to generate much revenue (yes, the Laffer Curve [...]
Reblogged this on contentconservative.
[...] that this will even raise the anticipated revenues. As the Cato Institute's Daniel J. Mitchell points out, the rich have far greater control of the timing and composition of their income than the rest of [...]
[...] people, unlike the rest of us, have tremendous ability to change the timing, composition, and level of their income, which is a big reason why upper-income taxpayers paid much more to the IRS in the 1980s after [...]
[...] But I don’t trust him. In part because he’s a politician, but also because there aren’t enough rich people to finance big government (not to mention that the rich easily can alter their financial affairs to avoid higher tax rates). [...]
[...] But I don’t trust him. In part because he’s a politician, but also because there aren’t enough rich people to finance big government (not to mention that the rich easily can alter their financial affairs to avoid higher tax rates). [...]
[...] But I don’t trust him. In part because he’s a politician, but also because there aren’t enough rich people to finance big government (not to mention that the rich easily can alter their financial affairs to avoid higher tax rates). [...]
[...] 1. The rich already pay a disproportionate share of the total tax burden – The video explains that the top-20 percent of income earners pay more than 67 percent of all federal taxes even though they earn only about 50 percent of total income. And, as I’ve explained, it would be very difficult to squeeze that much more money from them. [...]
[...] But I don’t trust him. In part because he’s a politician, but also because there aren’t enough rich people to finance big government (not to mention that the rich easily can alter their financial affairs to avoid higher tax rates). [...]
[...] In part because he’s a politician, but also because there aren’t enough rich people to finance big government (not to mention that the rich easily can alter their financial affairs to avoid higher tax rates). [...]
[...] 1. The rich already pay a disproportionate share of the total tax burden – The video explains that the top-20 percent of income earners pay more than 67 percent of all federal taxes even though they earn only about 50 percent of total income. And, as I’ve explained, it would be very difficult to squeeze that much more money from them. [...]
[...] 1. The rich already pay a disproportionate share of the total tax burden – The video explains that the top-20 percent of income earners pay more than 67 percent of all federal taxes even though they earn only about 50 percent of total income. And, as I’ve explained, it would be very difficult to squeeze that much more money from them. [...]
[...] stated, there aren’t enough of the “1 percent.” Moreover, rich people have significant control over the timing, composition, and level of their income, so class-warfare tax hikes inevitably will fail to generate much revenue (yes, the Laffer Curve [...]
[...] They could point out that higher marginal tax rates discourage productive behavior. [...]
[...] They could point out that higher marginal tax rates discourage productive behavior. [...]
[...] people, unlike the rest of us, have tremendous ability to change the timing, composition, and level of their income, which is a big reason why upper-income taxpayers paid much more to the IRS in the 1980s after [...]
[...] For some types of tax changes, such as lowering tax rates on the “rich,” the revenue feedback may be very large because they have considerable control over the timing, level, and composition of their income. [...]
[...] tell us the “rich” should pay more, but we know upper-income taxpayer have considerable ability to alter the timing, level, and composition of their income, so we can expect significant Laffer Curve [...]
[...] tell us the “rich” should pay more, but we know upper-income taxpayer have considerable ability to alter the timing, level, and composition of their income, so we can expect significant Laffer Curve [...]
[...] What the left generally won’t admit, however, is that the rich are not a piñata, capable of disgorging limitless amounts of new money. There are big Laffer-Curve effects when tax rates climb too high, largely because upper-income taxpayers have considerable control over the timing, level, and composition of their in…. [...]
[...] you’re trying to stick it to the “rich,” you need to understand that they have tremendous control over the timing, level, and composition of their income. So unlike the rest of us, they can respond very easily when the government goes after [...]
[...] What the left generally won’t admit, however, is that the rich are not a piñata, capable of disgorging limitless amounts of new money. There arebig Laffer-Curve effects when tax rates climb too high, largely becauseupper-income taxpayers have considerable control over the timing, level, and composition of their in…. [...]
[...] as projected. Surely they are familiar with the evidence from the 1980s, and they must know that upper-income people have considerable control over the timing, level, and composition of their inco…." Perhaps Dan, despite being as cynical about politicians of both parties as anybody I know, [...]
[...] stated, there aren’t enough of the “1 percent.” Moreover, rich people have significant control over the timing, composition, and level of their income, so class-warfare tax hikes inevitably will fail to generate much revenue (yes, the Laffer Curve [...]
[...] people – whether they’re golfers, celebrities, investors, or entrepreneurs – have considerable control over the timing, level, and composition of their income. And they can afford to [...]
[...] I’m fond of my video analyzing the problems with class warfare tax policy, and I’ve explained that higher tax rates on the rich will cause bad Laffer Curve effects because investors, entrepreneurs, and small business owners have considerable ability to change the timing, level, and composition of their income. [...]
[...] understands that rich people have considerable control over the timing, level, and composition of their income, which is precisely why there are powerful Laffer Curve effects when politicians go after the [...]
[...] most rich people – whether they’re golfers, celebrities, investors, or entrepreneurs – have considerable control over the timing, level, and composition of their income. And they can afford to [...]
[...] This is just an isolated example, to be sure, but I’ve already shared IRS data confirming that the rich have tremendous control over the timing, level, and composi…. [...]
[...] IRS tax data, I’ve shown that this is a very inaccurate assumption. And I’ve also used IRS data to show the President that there are big Laffer-Curve effects [...]
[...] IRS tax data, I’ve shown that this is a very inaccurate assumption. And I’ve also used IRS data to show the President that there are big Laffer-Curve effects when [...]
[...] IRS tax data, I’ve shown that this is a very inaccurate assumption. And I’ve also used IRS data to show the President that there are big Laffer-Curve effects when [...]
[...] IRS tax data, I’ve shown that this is a very inaccurate assumption. And I’ve also used IRS data to show the President that there are big Laffer-Curve effects [...]
[...] The key thing to understand is that revenue feedback is driven by the degree to which a tax cut leads to more taxable income. And you tend to get bigger changes in taxable income when you lower rates on taxpayers who have considerable control over the timing, level, and composition of their income. [...]
[…] But I don’t trust him. In part because he’s a politician, but also because there aren’t enough rich people to finance big government (not to mention that the rich easily can alter their financial affairs to avoid higher tax rates). […]
[…] tell us the “rich” should pay more, but we know upper-income taxpayer have considerable ability to alter the timing, level, and composition of their income, so we can expect significant Laffer Curve […]