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Effect of higher taxes on rich is unknown
A fistful of money
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TEXT OF STORY
Tess Vigeland: Congress is off for Thanksgiving vacation, but when it returns, the big question will be what to do about the Bush tax cuts. They're set to expire at the end of December.
Many economists say they unfairly benefit wealthy Americans. Millionaires and billionaires save hundreds of thousands of dollars and more on their annual tax bills. Middle-class Americans save, on average, $1,000. So, does helping the rich get richer help the rest of us?
Here's Marketplace's David Gura.
David Gura: In the U.S., most of the richest of the rich aren't pro athletes or movie stars -- they're high-paid executives. "Corporacrats" to some. John Katzman's one of them. He founded a test prep business in the early 80s.
John Katzman: I started the Princeton Review many years ago. And three years ago, I started a new company, and in-between, I funded some others. If that makes me a corporacrat, then so be it.
Katzman joined Patriotic Millionaires for Fiscal Strength, a group made up of millionaires who want to pay higher taxes.
Katzman: I don't think it would change anyone's life at all. I don't think they would invest less. And I don't think they would spend less.
Generally the rich don't fill out surveys on their spending, so there's no way to know if money goes into stocks or hedge funds, and if it creates jobs.
Benjamin Harris: This is sort of the dirty secret of tax policy, is that we really don't know.
Benjamin Harris is an economist at the Brookings Institution. He says we also don't know how permanent tax cuts might change their behavior.
Harris: There's a lot of uncertainty about exactly how the wealthy can respond to tax cuts, which means there's a lot of uncertainty about how the rest of us benefit.
I asked Yale political scientist Jacob Hacker what we do know.
Jacob Hacker: What we do know is that the gains of those tax cuts didn't trickle down to middle-class Americans.
But the argument still goes that cuts promote growth and create jobs. Hacker, co-author of a book called "Winner Take All Politics," says history tells a different story.
Hacker: From 2001 to 2003, we slashed taxes on the richest of Americans, and we experienced a relatively modest economic boom, most of the gains of which went to the richest and not to middle-class Americans.
The Congressional Budget Office says permanent cuts won't help growth in the long run, and they'd add $700 billion to the deficit. And that's why millionaire John Katzman signed the letter saying his taxes should go up.
Katzman: I'd like to just think of this as a down payment. It's someone stepping up and saying, we'll go first.
And that savings would trickle down.
In Washington, I'm David Gura for Marketplace.
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for the wealthy who wish to pay more of their share to the country that helped them get rich: just donate that excess cash to charity. Or begin your own foundation.
that way, the money really does go where you want, and doesn't go where you don't want (war, certain social programs, whatever).
I really don't understand why the idea of a flat tax via payroll deduction for individuals and corporations can't work. We are based on an economy where people and corporations are rewarded for producing value. The idea of further taxing that added value is something that plainly penalizes innovation and competiveness in the marketplace. I don't know what the number would be but lets just say its 20%. Whether you make $15000 or $15B you would be taxed the same.
The stick with this plan is that I would eliminate all deductions for charities, tithes and even the sacred mortgage deduction. All deductions are eliminated. WHen I give to a charity I rarely think about getting a receipt for tax purposes. If the charity relies on the tax deduction as an incentive to give to the charity then I think there is something operationally or its mission.
Finally what about the poor. The achilles heal is that the poor will suffer worse. But perhaps the raising of the minimum wage to above a poverty level for a given area would help. Also the tax rate should be set where the government has a surplus that could be used solely on rebuilding poorer neighborhoods and rural areas with value added jobs.
The final benefit would be the streamlining of our tax collecting process.
I know this has been a republican proposal from a few years ago, but as a democrat leaning lefty, I think its time to look at this again to see if it can be brought back
Not that anyone else is going to read these comments again after posting, but I think people out there think that the IRS will simply keep an overpayment of taxes. They will not; they will send you a nice refund check. So, even if the altruistic millionaires wanted to, they couldn't pay more than the taxes they owe under the current tax regime.
"So, does helping the rich get richer help the rest of us?"
What the socialist hell are you saying Tess? A degree in political science did not expose me to more socialist doctrine, not even Karl Marx's The Communist Manifesto has the audacity to purport that the masses help the rich get richer by letting the rich keep what they have already created and posses.
What part of an absence of affect is help?
I think I shall institute a tax on my annual contribution to public radio... why should I help radio personalities like yourself get richer?
If these millionaires want to pay higher taxes, nobody is stopping them; the government certainly won't object if they overpay on their taxes. What Katzman really wants is for his *peers* to pay higher taxes, which is another thing entirely.
Also, even a modest economic gain in the beginning of the last decade is remarkable; based on the terrorist attacks and the collapse of the dot-com bubble, you'd think it would have been only halfway through a recession.
And the effects of higher taxes on the rich are not quite "unknown"; they're actually quite well documented. Any number of states have tried raising taxes in the highest brackets, only to see revenues fall sharply; New Jersey is the one that leaps to mind as a somewhat recent example. And if looking at the historical records is too difficult, you could try asking a millionaire's accountant.
If anyone needed more evidence of the sad state of public discourse in America, these comments provide it. First - what seemed to me a straight-ahead story, rooted in facts, is condemned for its liberal bias. Second, the "other side" is amply represented in print and electronic media, and I assume you will air rebuttals and contrasting views if you receive them. Third, no individual report (or reporter) should be obligated to go beyond the subject of the story. "Balance" - if there is such a thing - needn't be achieved within each individual report. It can and is achieved within the totality of radio, television cable, print, blogs, and more. There are more than enough outlets for expression of opposing and contrasting views. I doubt that those who accuse you of bias are writing to Sean Hannity, Rush Limbaugh, or Glenn Beck demanding the inclusion of liberal views in their programs.
After reading Christian's first reply, I can't help but wonder how you guys at American Public Media feel about being called "NPR" all the time?
Granted, once many people see the word "public" they just throw you all into one pot, but still....
I'm also frequently amused at how a neutral story (read: dealing with facts or scholarly opinions on a fairly-even basis) is construed as being "liberal."
Since I prefer empirical facts to wild conjectures, I guess that makes me a liberal, huh?
Dan Woodard has it *exactly* right: a high marginal personal income tax rate doesn't raise money for the government. Instead, it drives money into more productive uses than personal consumption.
Dan cited business investment, which no doubt got the lion's share of the money. I'll add: when I was a kid, grown-ups in the 50% and 70% income tax brackets scrambled to make charitable donations so the money would do some good instead of going to the government. Charities create wealth by improving society.
I don't know what further proof one can ask for. High marginal personal income tax rates drove investment and created prosperity in the 1950s and 1960s. Starting in the 1980s, low marginal personal income tax rates diverted money *away* from investment and into personal consumption.
We need to encourage business investment and we need to reduce our government's deficit. Neither of those is served by continuing the Bush tax cuts. They simply must go.
Don't worry Wayne, that's why all those Tea party Republican's were elected, they're gonna set things straight!! Clean up the debt from Bush's unfunded wars, Prescription Drug Bill and giant tax breaks for the wealthy - thankfully they'll be getting rid of that awful Healthcare mess. Hopefully they'll manage to cut taxes again and set Wall Street free again to rise above all that restrictive regulation. It's amazing how much damage the Dem's can do in 2 years, they almost singlehandedly destroyed the economy.
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