"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Monday, March 14, 2011

The Rich Are Just Like You And Me... They Just Earn More Money

Fitzgerald is famously (and apocryphally) supposed to have told Hemingway that "the rich are different than you and I."   "Yes, Scott," Hemingway supposedly retorted.   "They have more money."

Democrats nowadays apparently believe the rich are ontologically different than us.... meaning that their income or wealth somehow make them less than human, and thus it becomes somehow moral for the rest of us to exploit them, steal from them, confiscate the fruits of their labor.   Thus, their response to any attempts to cut spending by federal, state or local governments is to demand that we "tax the rich."  

A couple of articles up on National Review today put the lie to the notion that the federal budget deficit could be cured by simply taxing the very wealthy.   First, Kevin Williamson argues that there are "not enough millionaires" to do the job:
When it comes to the Scrooge McDuck set, the problem isn’t that they’re not rich enough, it’s that there aren’t enough rich — not enough to do what liberals want to do, anyway, which is to balance the budget by increasing taxes on them. Let’s deploy some always-suspect English-major math:

There are lots of liberal definitions of “rich.” When Pres. Barack Obama talks about the rich, he’s talking about people living in households with income of more than $250,000 or more.... Club 250K isn’t all that exclusive, and most of its members aren’t the yachts-and-expensive-mistresses types.

Nonetheless, there aren’t that many of them. In fact, in 2006, the Census Bureau found only 2.2 million households earning more than $250,000. And most of those are closer to the Lubbock city manager than to Carlos Slim, income-wise....

[S]ay we wanted to balance the budget by jacking up taxes on Club 250K. That’s a problem: The 2012 deficit is forecast to hit $1.1 trillion under Obama’s budget. (Thanks, Mr. President!) Spread that deficit over all the households in Club 250K and you have to jack up their taxes by an average of $500,000. Which you simply can’t do, since a lot of them don’t have $500,000 in income to seize: Most of them are making $250,000 to $450,000 and paying about half in taxes already. You can squeeze that goose all day, but that’s not going to make it push out a golden egg.
Meanwhile, Robert Verbruggen, following up on Williamson's point, asks "How Much Money Do the Rich Have?":
The best numbers I could find came from IRS returns in 2008 (Excel spreadsheet). Unfortunately, the cutoff the IRS uses is $200,000 rather than $250,000, which is the level at which Obama promised no tax hikes.   But if anything, counting more taxpayers as “rich” — and thus making more money available for government plundering — will bias the results against Kevin’s argument.

The first question is: How much do these folks make in total? The answer is about $2.5 trillion.

If we wanted, we could stop here: You’d need to grab almost half that to finance the deficits Obama’s talking about, and for many of these taxpayers, the other half is already taken in federal and local taxes. No one works for free.
Noting these analyses, Ace of Spades argues that Republicans need to be pushing this idea:
The Republicans need to read every word of this and memorize every single figure, and then memorize additional figures that illustrate the problem, and repeat them endlessly on every Sunday talk show they appear on and every speech they make.

I keep saying this: There simply are not enough rich such that taxing them at even high rates can do more than dent the enormous deficits.
I feel very strongly that this is the wrong argument to make, and will backfire.   The point is not that, even if we confiscated all of the wealth of the Top 10%, we couldn't balance the budget.   The point that Republicans need to stress is that, even if we could, it would be wrong!    The "wealthy" typically become wealthy because they have worked harder, saved more, risked more, created more, and in the process have already done huge services for their society.   A person who earns a high income in a free society does so because other free individuals have chosen to pay him or her for some good or service they believe to be valuable.   To confiscate their wealth is simple theft, and dressing it up in the language of progressivism, as we have for a hundred or more years, doesn't make it anything more noble.  

Until we get to the point where we are not making public policy based on envy, we are going to be stuck in these same rhetorical games.   Republicans ought not play on the playing field of taxing or not taxing "the rich."   They should challenge the entire premise of a tax policy that differentiates between a dollar earned by Citizen A and a dollar earned by Citizen B as a violation of equal protection.   The "rich" aren't different; they're human beings just like the rest of us.  What we wouldn't do to a random person -- steal from them -- we ought not do to a person just because we've identified them as wealthy.

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