By Paul Roper
A case for keeping tax rates where they are or even lowering them
I recently read an article on the economic collapse blog titled “50 Economic Numbers about the U.S. That Are Almost Too Crazy To Believe” (www.economiccollapseblog.com); the blog does a great job of compiling conventional as well as offbeat economic numbers, and I came across one that made me laugh and want to throw my hands up at the same time. It said that “If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt”; that number is not a typo. Against this backdrop, I felt it would give a way to frame the debate about the “1%” percenters, and the rest of us to try to offer solutions.
The Obama Administration has filled the debate with populous rhetoric, and has tried to consistently rally his troops around the idea that simply by taxing those that make up the “1%”, that we will somehow magically cure all of our ills and achieve financial equality. Let’s take a couple of minutes, and look at both sides, and while this is pretty dry stuff, it affects every American and how this debate plays out will determine the fate of our nation over the next 5 to 10 years.
In an article published on YAHOO! FINANCE by Robert Frank of CNBC (Study: Tax Cuts for the Rich Don’t Spur Growth), Mr. Frank states that according to a study by the Congressional Research Service (CRS), a non-partisan research office for Congress shows that “There is little evidence over the past 65 years that tax cuts for the highest earners are associated with savings, investment or productivity growth.” Mr. Frank also notes that “The study found that higher tax rates for the wealthy are statistically associated with higher levels of growth.” Now, while I cannot dispute the findings implicitly, I can say that these are extraordinary times that probably did not give the CRS a sample that would survive the times we live in today; real unemployment above 11%, 60% of mortgages are underwater since 2007, and credit that is extremely tight even for qualified borrowers. I am not implying the CRS is wrong, but merely that times have changed to the extreme. As everyone knows, the “fiscal cliff” is fast approaching and without action from a partisan Congress which seems unlikely, particularly in an election year, we will face mandatory cuts to entitlement programs coupled with tax hikes, seemingly a no win situation for anyone, which has created a great deal of personal and business instability.
Now, let’s look at the case for keeping tax rates where they are or even lowering them. Although President Obama has tried to pit everyone against the top earners, while at the same time accepting campaign donations from them, the Organisation for Economic Co-Operation and Development (OECD) (www.us.oecd.usmission.gov) has found something quite different, and given useful comparisons, stating in an article in The Economist (www.economist.com):
“According to the OECD, a think tank, the top 10% of earners contribute about a third of total tax revenues – 28% in France, 31% in Germany and 42% in Italy; rich Briton’s pay 39% of total taxes while Americans wealthiest households contribute a larger share to government then in any other OECD country at 45%.”
Not to oversimplify, but it seems to me as if the “1%” in America is doing their fair share given that based on the math above, roughly 31 million people pay almost half of total taxes in the U.S. for a population of over 310 million citizens. The article goes on to state that:
“Looking just at income tax, the share paid by the top 1% of earners in America rose from 28% in 1988 to 40% in 2006, in Britain it rose from 21% in 1999 to 28% this year.”
No wonder the rich are voting with their feet and moving to other nations. This study does not take into consideration that the top corporate rate of 39% is also the highest in the world, and the vast majority of the “1%” is going to be affected because they probably have built some type of business that is successful making their contributions even more egregious. Now, I know this kind of thinking does not fit well into the Obama propaganda machine and the divisions they wish to perpetuate.
What we risk in this debate is one of the core beliefs of the U.S., one of the tenets that we were founded on, and is a cornerstone of every democracy is “No taxation without representation”, and because we demonize one class over another for an election is ludicrous. That is like a member of the “1%” demonizing someone on welfare that may come from a situation, where their circumstances have dictated that they are a second generation welfare recipient. The only way that the wealthy do not vote with their feet, is if our politicians can create an environment and the framework in order to retain the brightest, and most motivated that just happen to also represent the class of job creators that in these difficult times, we need the most, not demonize and chastise those people.