Obama has expanded the crony capitalist state. Like his brother in cronyism George W. Bush, Obama has made every effort to help the connected get more connected and the wealthy wealthier. As the attached article explains, if one is heavily invested in the market, if one is a banker at one of the big banks, things are going pretty well. If one is not in that camp things are likely going significantly less well.
Simply, Obama’s “Fairness” Economy Has Backfired. In a big way.
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Rich got richer, everyone else got poorer during first two years of U.S. recovery: Report
Top 7 per cent of Americans owned 63 per cent of nation’s household wealth, Pew Research Center says.
By: Pauline Jelinek The Associated Press, Published on Tue Apr 23 2013
WASHINGTON—The richest Americans got richer during the first two years of the economic recovery while average net worth declined for the other 93 per cent of U.S. households, says a report released Tuesday.
The upper 7 per cent of households owned 63 per cent of the nation’s total household wealth in 2011, up from 56 per cent in 2009, said the report from the Pew Research Center, which analyzed new Census Bureau data released last month.
The main reason for the widening wealth gap is that affluent households typically own stocks and other financial holdings that increased in value, while the less wealthy tend to have more of their assets in their homes, which haven’t rebounded from the plunge in home values, the report said.
Tuesday’s report is the latest to point up financial inequality that has been growing among Americans for decades, a development that helped fuel the Occupy Wall Street protests.
A September Census Bureau report on income found that the highest-earning 20 per cent of households earned more than half of all income the previous year, the biggest share in records kept since 1967. A 2011 Congressional Budget Office report said incomes for the richest 1 per cent soared 275 per cent between 1979 and 2007 while increasing just under 40 per cent for the middle 60 per cent of Americans.
Statistics: Posted by yoda — Tue Apr 23, 2013 11:05 am
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Liberals Sure Do Love to Tax the Rich (and Other Popular Myths)
I am tired of the myth that liberals want the rich to pay more taxes. And that it is accepted as gospel, or worse, scientific consensus. It’s complete hogwash.
I originally wrote this in response to a question as to why liberals would oppose a flat consumption tax, as it would be a very progressive tax in that it would be born more by the rich, who consumer more, than the poor, who consume less. To the questioners mind, ‘this is what liberals want isn’t it?’
No it isn’t. Liberals don’t want the rich to pay more taxes. They just want us moronic voters to think that they want the rich to pay more taxes, and it’s worked like a charm for a very long time, right?
‘Investment’ is liberal code for ‘spending we like’. Whereas ‘loophole’ is liberal code for ‘spending we don’t like’, though I must confess to being hard pressed to identify much spending that liberals don’t like, so I think what this means is spending on ‘the rich’ that we can blame on evil Republicans, but the rich still vote so we are reluctant to alienate them completely. Yes, I know, technically a ‘loophole’ isn’t spending at all, rather the government allowing you keep a little more of your own money, but remember, we’re talking about liberals here and to them it isn’t ‘your’ money we’re talking about, it’s ‘our’ money, so allowing you to keep more of it has, is, and will remain, to them, ‘spending’.
In the same vein, why don’t liberals want means testing for Social Security and Medicare? So they can say that they are programs that benefit ‘everybody’ (and as they do in fact benefit the rich, the rich won’t oppose them, though they are still, in net, wealth redistribution schemes, although, interestingly enough, more from young to old than rich to poor, yet somehow, a win for them none the less. I tried, but can’t figure this out either.)
But let’s get back to the liberal passion for taxing the evil rich. Our tax code is the root all evil, it is most of what ails our country today.
A consumption tax, or even a flat income tax, makes so much sense that it would be DOA immediately upon arrival on Harry Reid’s desk (on the off chance it made it that far.) If the Democrats (or even Republican, for that matter,) scrapped our serpentine tax code in favor of something as sensible as you propose it would eliminate the power they have to bestow favors upon those willing to pay lots and lots of money for those favors.
Companies like GE and Google paying ZERO taxes on BILLIONS of dollars of revenue, Democrats ‘looking out for the middle class’ and ‘asking everyone to pay their fair share’ notwithstanding. The tax code is, quite simply, the life blood of the crony capitalism that is destroying our Republic and it is what makes a Senate or House seat worth the millions of dollars spent to acquire one. It saddens me to say it but we really do have the best government money can buy.
So I suppose the short answer to the question as to why liberals, or to be completely fair, any politician, would oppose a consumption tax (or even a flat income tax for that matter,) is that it’s not about fairness, or about wanting the rich to pay more, they obviously don’t. It’s about nothing more
Statistics: Posted by yoda — Sat Mar 09, 2013 4:06 pm
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Jack Lew knows how to get people to give him large sums of money. (And power.)
(From Real Clear Markets)
New York University gave him a loan for housing. The universally recognized trouble with loans is that they have to be paid back. Not to worry. All is forgiven if you are Jack Lew, especially your loans. According to Lew, the university forgave the loan of some $1.4 million “in equal installments over five years.”
When he left NYU, Lew received what he describes as “a one-time severance payment upon my departure.” He wasn’t fired, usually the occasion for severance pay. He simply left and got paid for the act of leaving. Hey, that’s Jack Lew — he gets paid when he stays, and he gets paid when he goes.
He went to Citigroup, which NYU had made its primary private lender for student loans in exchange for a cut of those loans. (Coincidences happen to everyone, including Jack Lew.) At Citi, Lew established beyond a doubt his expertise at getting paid. In 2008, as the bank nearly blew up and laid off one-seventh of its employees, Lew ran its disastrous Alternative Investments unit — and got paid $1.1 million.
The post Rich Lowery at National Review: Jack Lew not so bad, just good at “getting paid.” appeared first on AgainstCronyCapitalism.org.
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There are two very different Americas today. In one, the stock market is soaring, high end homes are selling briskly, big banks and hedge funds are rolling in money as if the last financial crisis never even happened, and life is really, really good. In the other America, good jobs are incredibly scarce, incomes are declining, and poverty is skyrocketing to levels that we have never seen before. The gap between the wealthy and the poor in America is getting wider with each passing day. In fact, it is my contention that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does. If you have never seen Downton Abbey, you really should. It is one of the most extraordinary shows to appear on television in years. It is a drama set in the UK which follows the lives of the aristocratic Crawley family and their servants throughout the early part of the 20th Century. It can be a bit jarring to watch servants wait on their masters hand and foot and refer to them by such titles as “Lord” and “Lady”, but the truth is that in many ways there is more inequality today than there was back then. As far as people living in the worst areas of cities such as Detroit and Cleveland are concerned, the socialites that live on Fifth Avenue in New York City or in multi-million dollar homes out in the Hamptons might as well be from another planet. If you have lots of money, America is still a really great place to live. If you barely have any money, America can be really cold and cruel. Sadly, our politicians continue to pursue policies that make things even better for those working for the establishment in places such as Washington D.C. and Manhattan, and worse for all the rest of us. This has especially been true over the course of the past four years. If nothing is done, the gaping chasm between the rich and the poor will continue to get even worse, and in the end that will have some really severe consequences for our society.
So is the answer to raise taxes and “redistribute” more money to the poor? Of course not. Today, we are already paying dozens of different kinds of taxes every year and the government is handing out more money to people than ever before. But poverty just continues to explode.
What the poor in the U.S. desperately need are good jobs, but we continue to ship millions of good jobs out of the country and Barack Obama continues to pursue policies that are killing the U.S. economy.
There is not much help on the horizon for the poor or the middle class in America, and that should be distressing for all of us.
But things in the wealthy parts of America are going absolutely wonderfully right now. Let’s take a few moments and contrast what life is like in the two Americas right now…
In the “good America”, stocks are absolutely soaring. In fact, the S&P 500 closed above 1,500 on Friday for the very first time in more than five years.
In the “bad America”, poverty statistics just continue to get worse. According to a newly released report, 60 percent of all children in the city of Detroit are living in poverty.
In the “good America”, hedge funds are rolling in the profits. The Dow just had its best January since January of 1994, and many analysts are projecting that 2013 will be a banner year for the markets.
In the “bad America”, median household income has fallen for four years in a row, and millions of families are really struggling to find a way to pay the bills each month.
In the “good America”, expensive homes are selling at a pace that we have not seen in years. Just check out what is happening in the Hamptons. According to the National Association of Realtors, sales of homes worth at least a million dollars were 51 percent higher in November 2012 than they were in November 2011.
In the “bad America”, there are hordes of young adults that cannot find jobs and cannot take care of themselves. Shockingly, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
In the “good America”, the “too big to fail” banks are partying like it was 2005 again. For example, revenues at Goldman Sachs increased by about 30 percent in 2012 and Goldman stock has soared by more than 40 percent over the past 12 months.
In the “bad America”, poverty is exploding and government dependence has become a way of life. If you can believe it, the number of Americans on food stamps has grown from about 17 million in the year 2000 to more than 47 million today.
In the “good America”, those working for the establishment will do just about anything to make a buck. For instance, Goldman Sachs made 400 million dollars driving up food prices in 2012 while hundreds of millions around the world existed on the edge of starvation.
In the “bad America”, millions of families are wondering how they will make it until next month. If you can believe it, more than a million public school students in the United States are homeless. This is the first time that has ever happened in our history.
In the “good America”, everyone has a good ride. In fact, sales of luxury German-made vehicles set new all-time records in 2012.
In the “bad America”, those that have lost everything are shunned and ostracized. In fact, many communities all over America are actually making feeding the homeless illegal.
The fact that there is poverty in America should not alarm you. Every country in the world has poverty. What should alarm you is how rapidly it is growing. Even though the Obama administration tells us that we are in an “economic recovery”, things just continue to get worse. The wealthy elitists in Washington D.C. and New York City may be doing wonderfully, but the truth is that the middle class continues to shrink and just about every poverty statistic that you can think of continues to rise.
If you are convinced that we do not have a “wealth gap” problem in the United States today, just check out the following statistics. Most of them are from one of my previous articles entitled “The Middle Class In America Is Being Wiped Out – Here Are 60 Facts That Prove It“…
-According to the Economic Policy Institute, the wealthiest one percent of all Americans households on average have 288 times the amount of wealth that the average middle class American family does.
-In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.
-According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.
-The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.
-At this point, the poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.
-The United States now ranks 93rd in the world in income inequality.
-The average CEO now makes approximately 350 times as much as the average American worker makes.
Sometimes, when the “good America” and the “bad America” collide, the results are quite humorous.
For example, a 23-year-old homeless Brazilian man and his friends recently decided to “move in” to a 7,522 square foot house down in Florida that is valued at $2.1 million. The following is from a recent article in the Orlando Sentinel…
Bank of America has filed to evict nine squatters from a $2.5-million mansion in a posh Boca Raton neighborhood.
In a filing in Palm Beach County court that names 23-year-old Andre De Palma Barbosa and eight other unknown people, the bank claims rightful ownership of the home – despite Barbosa’s attempt to stake his claim on the foreclosed waterside property by using an obscure Florida real estate law.
Barbosa has been invoking a state law called “adverse possession,” which allows someone to move into a property and claim the title – if they can stay there seven years.
A signed copy of that note is also posted in the home’s front window.
Yeah, they will be able to get him and his friends out of there eventually, but in future years I fear that the conflicts between the rich and the poor will not be so nice.
Already, a very ominous “Robin Hood mentality” is building among the poor in this country. Many wealthy people don’t even realize that it is happening. But someday when desperate “flash mobs” are roaming through their neighborhoods looking to do a little “creative redistribution”, then they will get it.
Our society is starting to come apart at the seams, and there is an incredible amount of tension between the rich and the poor. This is unfortunate, but instead of calming things down many of our politicians are actually exploiting this tension.
When our economy crashes, the class warfare of today may actually turn into real war in the streets. Desperate people do desperate things, and when people are hungry and they can’t feed their families, many of them will not be afraid to go over to the wealthy neighborhoods and take what they want.
A lot of people don’t want to see them, but dark clouds are building. According to a recent Gallup poll, Americans are more negative about where America will be five years from now than they have ever been before. Most people know that we are on the edge of something really bad, even if they can’t really explain it.
It is time to get ready for what is coming. Even though the stock market is soaring right now, that could change at any moment. All of the long-term economic and societal trends are pointing to some really bad things in the years ahead, and sticking our heads in the sand and pretending that everything is going to be okay somehow is not going to help.
So what do you think about all of this?
Do you think that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does?
Please feel free to post a comment with your thoughts below…
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I see that I’m quoted in Annie Lowrey’s New York Times Magazine story, “Washington’s Economic Boom, Financed by You”:
David Boaz, executive vice president of the Cato Institute, told me: “Washington’s economy is based on the confiscation and transfer of wealth produced elsewhere. Out in the country they’re growing food, building cars and designing software — all these things that raise our standard of living. Here in Washington, everyone is writing memos to each other about how to take some of that money and which special interest should get it.” I asked him if he liked living in the city, which has become undeniably nicer. Boaz sputtered a bit. “I can’t walk to lunch from my office without having to avoid the construction projects!” he said. “For Washington, it does mean better restaurants and better entertainment, and the potholes get filled faster. But for the country as a whole? I don’t think it’s a good thing for America.”
I’m confident I didn’t sputter, but otherwise this sounds right. I’ve been writing about the wealth of the Washington area and where it comes from for years.
In 2005 I wrote about – yes – the construction projects that block my way to lunch in a “big-government building boom.”
In 2006 I leaned on Waymon and Willie to offer some advice to parents:
Mammas, don’t let your babies grow up to be cowboys,
Don’t let ’em make software and sell people trucks,
Make ’em be bureaucrats and fed’rals and such.
Here are a few other links to discussions of Washington’s wealth, starting with the most recent news:
I focused on why money flows to Washington way back in 1983 in the Wall Street Journal:
Business people know that you have to invest to make money. Businesses invest in factories, labor, research and development, marketing, and all the other processes that bring goods to consumers and, they hope, lead to profits. They also invest in political processes that may yield profits.
If more money can be made by investing in Washington than by drilling another oil well, money will be spent there.
Nobel laureate F.A. Hayek explained the process 40 years ago in his prophetic book The Road to Serfdom: “As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power.”
As the size and power of government increase, we can expect more of society’s resources to be directed toward influencing government.
And all of this relates to an idea I discussed in Libertarianism: A Primer:
Libertarians developed a pre-Marxist class analysis that divided society into two basic classes: those who produced wealth and those who took it by force from others. Thomas Paine, for instance, wrote, “There are two distinct classes of men in the nation, those who pay taxes, and those who receive and live upon the taxes.” Similarly, Jefferson wrote in 1824, “We have more machinery of government than is necessary, too many parasites living on the labor of the industrious.” Modern libertarians defend the right of productive people to keep what they earn, against a New Class of politicians and bureaucrats who would seize their earnings to transfer them to nonproducers.
Sheldon Richman has more on this libertarian class analysis that focused on “conflict between producers, no matter their station, and the parasitic political classes, both inside and outside the formal state,” or “between the tax-payers and tax-eaters.”
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The (Very) Rich Get (Much) Richer
Written by Jeff Nielson
Thursday, 03 January 2013 13:28
How do we define the term “obscenely wealthy”? We start with people who already have more wealth than any humans in the history of our species. We then watch these people getting much wealthier, much faster than anyone else on the planet. And then we listen to them lusting for even more wealth.
No one does a better job of illustrating obscene wealth than the lovers-of-Big-Money at Bloomberg. It’s recent headline summarizes this attitude perfectly:
Billionaires Worth $1.9 Trillion Seek Advantage in 2013
We have a handful of Oligarchs sitting on a mountain of wealth large enough to completely eliminate global poverty – with enough left over for they and their entire family clans to live lives of perpetual luxury. However this is not the truly “obscene” aspect of this paradigm. The true obscenity lies in the fact that these Oligarchs remain obsessed with getting much richer, much faster – and at the expense (literally) of everyone else.
Again, Bloomberg illustrates this for us with perfect clarity. It notes that these billionaires who were worth roughly $1.65 trillion at the beginning of 2012 are now worth $1.9 trillion at the end of 2012. That’s approximately a 15% increase in their total wealth, in one year, after paying(?) their taxes, and after all the lavish spending which characterizes the life of the average billionaire.
How many of the Working Poor got 15% wealthier last year – after paying their taxes and all their living expenses? Zero? Indeed, only the most entrepreneurial (or crooked) millionaires would have been able to increase their wealth at the obscene rate of these billionaires. Yet what do we hear out of the mouths of Billionaires like Warren Buffet? “Tax the millionaires.”
Specifically, tax the income of the millionaires (much harder). Note that the billionaires also have large incomes. However, once one acquires this obscene level of wealth, “income” becomes a trivial element of their total wealth.
Few billionaires have annual (taxable) “incomes” above $50 million/year. Yet for even a ‘bare’ billionaire this amounts to only 5% of their total wealth. So how did all of these billionaires get wealthier by an average of 15% last year alone? The untaxed appreciation of their vast assets.
Even if all the incomes of all the billionaires were taxed at 100%, these billionaires would still be getting wealthier much faster than anyone else in society. This is why I continue to regularly point out in my commentaries that it is never possible to construct a fair tax system based on income taxation. Inevitably, income taxation makes those on the bottom much poorer, while allowing the Top-1% to accumulate (and hoard) wealth at a rate which would have made the kings and queens of the Middle Ages envious.
The only possible fair form of taxation is wealth taxation, specifically a flat wealth tax. Everyone pays the same rate, and no one (including the billionaires) is able to hide the vast majority of their wealth from the Tax Man. Thus when Warren Buffet says “tax the (incomes of the) millionaires”, he doesn’t say this because he wants to start paying his “fair share” of taxes. He says this so that he (and his Oligarch buddies) can continue to avoid paying their fair share.
Note that Bloomberg makes it clear that the Oligarchs aren’t satisfied with getting only 15% wealthier in one year. In 2013 they want an “advantage” for themselves. This presents two, obvious questions for readers.
How much richer do these Oligarchs think they are entitled to become in 2013? How much richer do the Oligarchs think the Little People are entitled to become in 2013?
What makes the second question even more pertinent than the first is that the Little People (the Working Poor) didn’t get 15% wealthier in 2012. In fact (on average), they all got significantly poorer. For example, the U.S. standard of living (for the Little People) has fallen by more than 50% over the past 40 years.
Indeed, the precise reason why all of the debt-saturated economies of the West are on the verge of implosion is because these Vampire Billionaires have blood-sucked us dry. And in referring to our massive debts this brings us to the fiction in the Bloomberg article.
Bloomberg refers to its list of Oligarchs as “the richest people in the world”, yet even its own research indicates this is a farcical classification. In its sub-title, “Hidden Billionaires”, Bloomberg discloses that 54 of these Oligarchs were “discovered” in 2012 alone. They didn’t become billionaires last year, but rather their vast wealth-hoards were only identified for the first time last year.
What about the Trillionaires?
There is somewhere in the vicinity of $200 trillion in total debt floating around the global economy; comprising total sovereign, corporate, and personal debt. Who holds the IOU’s?
It’s not governments. They’re all debtors. It’s not the corporations. They’re (almost) all leveraged-to-the-hilt with debt, because in the Age of the Oligopoly all their time, energy and financial resources are going into buying up other corporations. It’s certainly not the Little People. Even in (supposedly) “wealthy” Western economies, personal debt-levels have never been higher, meaning net wealth has never been lower.
We know from Bloomberg’s own numbers that the total wealth of the (supposed) “richest people” is a mere $1.9 trillion – and that is all of their wealth combined. Who is holding the IOU’s on the other 99% of this $200 trillion in debt? The Trillionaires.
These are the people who are so wealthy that their wealth hasn’t even been “discovered” yet by the sleuths at Bloomberg – and likely never will. Even at currently artificially low interest rates, these Vampire Trillionaires blood-suck the global economy for $trillions every year in interest payments alone.
This is why (real) economic growth is now impossible for all but the most-robust (or least-indebted) economies. In a $70 trillion global economy, we have the Trillionaires skimming roughly 10% per year off the top, for themselves. What readers must understand is that this “taxation” of the entire global economy by the Trillionaires – in the form of interest payments – is essentially nothing less than the proceeds of crime.
We start with income taxation, a form of taxation which (as a matter of arithmetic) must impoverish the bottom-80% over time, turning them into debtors. Most of the rest of the top-20% prosper moderately under this extremely corrupt form of taxation, while (as we have seen) the Oligarchs get a complete ‘free ride.’
With the bottom-80% turned into impoverished debtors, this starves our consumption-based economies of revenues. This “revenue crisis”, in turn, turns our governments into massive debtors; as even modest levels of public/social services can no longer be maintained by the trickle of tax revenues flowing in.
These $trillions per year which the Trillionaires are siphoning-out of the global economy (and into their own wealth-hoards) are being extorted out of the global economy via an entirely corrupt economic system. The very, very rich are not simply getting much, much richer. They are doing so by stealing from everyone else.
Statistics: Posted by yoda — Thu Jan 03, 2013 1:52 pm
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The hedge funds and the big banks have done better than anyone under the Fed’s printing regime.
When the Fed prints the guys that do the best are the guys who have a direct line to Bernanke and Co. Where do you think all the new money goes? I haven’t seen any checks show up in my mail box.
The big banks and the hedge funds have done amazingly well over the past 3 years or so. Never forget that the quarter after Goldman Sachs was bailed out was the most “profitable” in the history of the bank.
Goldman Sachs was dead in the Fall of 2008, but the Fed not only saved the recklessly leveraged investment bank but gave it so much money that bonuses in 2009 were the largest Goldman had ever handed out. Many a Maseratti was bought in the depths of the recession with money that flowed from the Fed.
So when Bernanke and the President wax about how increased easing is going to “save the American economy” take it with a greain of salt.
The post A Top Left Economist Says That the Fed is Helping the Rich, Hurting the Poor. He’s Right. appeared first on AgainstCronyCapitalism.org.
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Unfortunately the government isn’t helping answer the question.
US government statistics on income inequality are mostly bogus for many reasons. They don’t adjust for shifts in the age of the population (older people are richer), for emigration (emigrants generally start poor), number of hours worked (shouldn’t someone doing three jobs have more?), or the composition of the “households” being measured (more single households among the poor means they are probably doing better financially but will show up as doing worse and the number of single households has sharply increased.)
In addition, the government doesn’t count some things as income that it should (earned income tax credit checks, housing vouchers) and does count things it should not (capital gains are not earned income, they are just trades of one asset for another.
So the truth is hard to figure out. Still it seems a reasonable surmise that at least some rich are getting a lot richer (the crony capitalists) while other rich are not and the poor are indeed getting poorer. However, it always good to have one’s assumptions challenged and the article below does that. It adjusts “households” into individuals, and looked at that way, says the share of incomes from the bottom to the top has not changed much in recent years, that the income inequality ” crisis” is not supported by the facts.
I am still guessing that crony capitalism is skewing the income patterns, but of course it is true that there are many beneficiaries of it who are not rich. Even the public employee in California making over $800,000 does not quite make it to income millionaire status.
The post Are The Rich Getting Richer and the Poor Getting Poorer? appeared first on AgainstCronyCapitalism.org.
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By Daniel J. Mitchell
President Obama repeatedly assures us that he only wants higher taxes on the rich as part of his class-warfare agenda.
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).
Honest leftists are beginning to admit that their real target is the middle class. Here are a few examples.
- The New York Times endorsed higher taxes on the middle class in 2010.
- The then-House Majority Leader Steny Hoyer also gave a green light that year to higher taxes on the middle class.
- Earlier this year, MIT professor and former IMF official Simon Johnson argued that the middle class should pay more tax.
- The Washington Post also called for higher taxes on the middle class this year, as did Vice President Joe Biden’s former economist.
In other words, politicians often say they want to tax the rich, but the real target is the middle class. Indeed, this is the history of tax policy. In a post earlier this year, warning the folks in the Cayman Islands not to impose an income tax, I noted how the U.S. income tax began small and then swallowed up more and more people.
[T]he U.S. income tax began in 1913 with a top rate of only 7 percent and it affected less than 1 percent of the population. But that supposedly benign tax has since become a monstrous internal revenue code that plagues the nation today.
The same thing is true elsewhere in the world.
Allister Heath explains for London’s City A.M. newspaper.
The introduction of income taxes around the world have tended to follow a very similar pattern over the past couple of centuries. First, we get generally low income tax rates, with most people exempt and with the highest rate only affecting a few people relatively lightly. Eventually, tax rates shoot up for everybody – including to crippling levels for top earners – and millions more are caught by income tax. The next stage is that the ultra-high tax rates for top earners are reduced to manageable levels – but ever more people are brought into the tax system, with the higher brackets also catching vastly more folk.
By the way, you can see that Allister makes a reference to tax rates being reduced for top earners. That’s largely because many politicians learned an important lesson about the Laffer Curve. Sometimes, the best way to “soak the rich” is by lowering their tax rates. Unfortunately, President Obama still needs some remedial education on this topic.
Allister then looks at some specific United Kingdom data revealing how more and more middle class people are now subject to higher tax rates.
The biggest change in the UK has been the number of people paying what is now the 40p tax rate: up six-fold in thirty years, from 674,000 in 1979-80, 2.5m in 1999-2000 to 4.048m in 2011-12. This number will jump again to around 5m in 2014, according to the Institute for Fiscal Studies. When Margaret Thatcher came to power, just 2.6 per cent of taxpayers paid the top rate; by the time of the next election, 16.7 per cent will.
If Obama and other statists get their way, we’ll see similar statistic in the United States. Higher income tax rates for the rich will mean higher income tax rates for the rest of us. Though I’m even more worried about a value-added tax, which would be a huge burden on ordinary people and a revenue machine for greedy politicians.
It’s worth noting, by the way, that the American tax code actually is more “progressive” than the tax codes of Europe’s welfare states. This is largely because we don’t pillage poor and middle-class taxpayers with a VAT.
P.S.: Since I mentioned the Laffer Curve above, I should emphasize that the goal of good tax policy should be to maximize growth, not to maximize tax revenue.
P.P.S.: And don’t forget that poor and middle-income taxpayers also will be hurt because slower growth is an inevitable consequence when tax rates climb and the burden of government spending increases.
View full post on Cato @ Liberty