So What If Taxing Rich Hurts the Economy?

Consider this headline from a Reuters article in The Huffington Post: “Raising Taxes on Rich Won’t Hurt Economic Growth, CBO Says.”

But the first paragraph refutes the headline: “Allowing income tax rates to rise for wealthy Americans would not hurt U.S. economic growth much (emphasis added) in 2013 …” The CBO did not say, as the headline suggests, that raising taxes on the rich has no negative economic effect. In fact, the CBO actually said that extending the Bush-era rates for all would increase economic growth by 1.5 percent. If, however, the Bush era rates expired for the rich — but were retained for everybody else — economic growth would still increase, but by 1.25 percent.

In other words, raising taxes would result in less economic activity, not more. Herein lies the key to understanding why the left wants higher taxes for “the rich.” To the rich-should-pay-more crowd, the question of whether raising taxes hurts economic growth is less important than the issue of “fairness.”

Then-presidential candidate Barack Obama, in 2008, was asked why he insisted on pushing a capital gains tax increase given that, historically, higher capital gains rates meant less revenue:

ABC News’ Charlie Gibson: “You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, ‘I certainly would not go above what existed under Bill Clinton, which was 28 percent.’ It’s now 15 percent. That’s almost a doubling if you went to 28 percent. But actually Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20 percent.

Then-Sen. Obama: “Right.”

Gibson: “And George Bush has taken it down to 15 percent.”

Obama agreed, “Right.”

“And in each instance,” Gibson continued, “when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?”

Obama explained: “Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness (emphasis added). We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year — $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair. And what I want is not oppressive taxation. I want businesses to thrive, and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair.”

Years earlier, in 1998, the then-state senator told a Loyola University audience: “The trick is figuring out how do we structure government systems that pool resources and hence facilitate some (wealth) redistribution — because I actually believe in redistribution, at least at a certain level to make sure that everybody’s got a shot.”

The then-Democratic nominee Obama told Fox’s Bill O’Reilly that wealth redistribution was the neighborly thing to do. “If I can afford it,” said Obama, “what’s the big deal for me to say, ‘I’m going to pay a little bit more’? That is neighborliness.” And a month before the 2008 election, Obama explained to “Joe the Plumber” that “when you spread the wealth around, it’s good for everybody.”

In a 2001 Chicago radio interview, then-state Sen. Obama said: “The Supreme Court never ventured into the issues of redistribution of wealth (emphasis added), and sort of more basic issues of political and economic justice in this society. … One of the, I think, the tragedies of the civil rights movement, was because the civil rights movement became so court-focused, I think that there was a tendency to lose track of the political and community-organizing activities on the ground, that are able to put together the actual coalitions of power through which you bring about redistributive change — and in some ways we still suffer from that.”

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Larry Elder

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Larry Elder is an American radio and television personality. His radio program The Larry Elder Show airs weekdays 3pm on talk radio 790 KABC in Los Angeles, California.

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  • http://JamesTPereira.com/ James T Pereira

    Another word for fairness was communism. It has already failed. Russia and its minions collapsed and China abandoned it 2 decades ago. Will Obama make it a success, because he has a law degree?

  • Momof11

    So does Obama’s fairness mean that we bring the rich down incrementally closer to the misery level of the poor and if we create more poor in the process that is a price we will just have to pay? And this is of a benefit to whom?

  • Electra

    How could anyone in their right mind oppose a raise in the yaxes paid by the rich 1/100? That person would have to be paid for voicing sch an opiniom,or brainwashed. Jedge fund managers ripped off the people not only of this country but many others as well. They should not pay higher taxes? They got off scot free!

    Really momof11, paying a bit more in taxes is not going to bring the rich incrementally closer to the misery of the poor!

    Did you people check your brains at the door before reading this article?

  • Electra

    Jesus did not stand for fairness? For justice? Strange, lots of popes would have sworn he did, including the present one.

  • http://JamesTPereira.com/ James T Pereira

    Fairness should not be an euphemism for robbing the rich and giving the poor. That’s what communism tried to do and failed miserably. Sure Jesus and the Popes and every Christian is expected to practice justice and fight for it. And Jesus and the Popes sure don’t advocate taxing the rich and feeding the poor. Jesus expects each of us to do our part without force (i.e., legislation). The Church teaches subsidiarity not Big Government.
    And there are several research articles that show that taxing the rich is not going to solve the problem of the poor becoming any wealthier. If you give every person $1 Million, within one year, some would have made more, some no significant increase in wealth and some would have actually become paupers. That’s just human nature, each of us have different talents, behaviors and attitudes – it’s in scripture too. There can never be equality on this side of Heaven. This is also why God said, “Thou shalt not covert they neighbor’s goods”.

  • kirk

    The smoke in the air is not all from cigarettes! The claim that taxing the rich, at the same percentages that ordinary working stiffs pay for tax, will slow the economic recovery is simply that – puffs of smoke. The rich, gathered together in their self-satisfaction, will always find some way to lead the masses into believe anything. I know. I’ve worked in accounting for corporations. When the end of the fiscal year came around, the corporate officers invariably set aside 80% of the net gains of the year for bonuses, 78% for themselves, 2% to be divided among employee, perhaps enough to buy their Christmas ham.

    New cars, vacation homes, travel invariably followed for the more fortunate, and though their spending can be construed as helping the economy, it was not used for ventures to increase employment, as they would like us to believe.

    That may not apply to ALL corporations or small business, but a vast majority of them favor these practices for their officers, owners, directors. And, still – the rich congressmen/women want us to believe otherwise. In a country where a Mitt Romney can get by with paying 13% in taxes and the struggling farmer pays 33% – that is a travesty. It has noting to do with over-taxing the rich, but with fairness.

  • QuoVadisAnima

    Because as Britain & France have already learned – the rich generally don’t get rich by being stupid so they move away — and take their money with them. So you end up with an economy that has higher unemployment AND less tax revenue AND less money in the economy. (And taxing the rich won’t solve our country’s financial problem – which is that we are spending money we don’t have)

  • nah

    And you don’t get it. Perceived fairness is the whole aim of the left at whatever cost. Sadly, it will never be found or achieved and it will demand more aggregious forms of property confiscation. The rich will stay rich and the rest will suffer because of ideology. Big government spending is the problem, not who should pay more for it.

  • nah

    Do you really think divisive class warfare is the solution to our problems? Everytime it’s been used succesfully in history to divide a country, it has ended in disaster. Why would it work now? Our leader has only one answer – take and give away.
    No, my brains are still with me. A good way to determine that is whether I am agreeing with a political idealogue or not.
    Re-read the article and see where yours are!

  • nah

    Jesus said the poor would always be with us. That doesn’t mean we should be indifferent to the materially poor, but realize there will always be those in need. Quote me where he said we should take from others and justify it as social justice. Is taking wealth less of a sin than indifference to lack of wealth?

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