Arthur Laffer’s op-ed in the Wall Street Journal is a must-read. He makes the case, using historical data, that we simply cannot tax ourselves into prosperity. To hear the liberal politicians and pundits talk, allowing the wealthy in America to keep more of the money they earn is tantamount to willfully starving babies. Nothing could be farther from the truth. High taxation brings about less work, less prosperity and poverty for more people. It’s the opposite of spreading the wealth around, because tax receipts to the government actually decrease when tax rates are raised. The super-wealthy know how to get around paying those high taxes – they can afford expensive lawyers and accountants that most of us cannot.
Here’s a sampling of what high tax rates for the rich has led to in the past.
Or perhaps you’d like to see how the rich paid less in taxes under the bipartisan tax rate increases of Presidents Johnson, Nixon, Ford and Carter? Between 1968 and 1981 the top 1% of income earners reduced their total income tax payments to 1.5% of GDP from 1.9% of GDP.
And then there’s the Hoover/Roosevelt Great Depression. The Great Depression was precipitated by President Hoover in early 1930, when he signed into law the largest ever U.S. tax increase on traded products—the Smoot-Hawley Tariff. President Hoover then thought it would be clever to try to tax America into prosperity. Using many of the same arguments that Barack Obama, Nancy Pelosi and Harry Reid are using today, President Hoover raised the highest personal income tax rate to 63% from 24% on Jan. 1, 1932. He raised many other taxes as well.
President Roosevelt then debauched the dollar with the 1933 Bank Holiday Act and his soak-the-rich tax increase on Jan. 1, 1936. He raised the highest personal income tax rate to 79% from 63% along with a whole host of other corporate and personal tax rates as well. The U.S. economy went into a double dip depression, with unemployment rates rising again to 20% in 1938. Over the course of the Great Depression, the government raised the top marginal personal income tax rate to 83% from 24%.
Is it any wonder that the Great Depression was as long and deep as it was? Whoever heard of a country taxing itself into prosperity? Not only did taxes as a share of GDP fall, but GDP fell as well. It was a double whammy. Tax receipts from the top 1% of income earners stayed flat as a share of GDP, going to 1% in 1940 from 1.1% in 1928, but at what cost?
We all know that there are lots of factors influencing tax revenues from the rich, but the number one factor has to be the statutory tax rates government tells the rich they have to pay. Not only do the direct income tax consequences of higher tax rates on those in the highest brackets lead to higher deficits, the indirect effects magnify the tax revenue losses many fold.
The intellectual dishonesty and hypocrisy of the advocates for soaking the rich would be startling, if it weren’t so prevalent. Laffer also pointed out how people like John Kerry and the late Howard Metzbaum have gone out of their way to avoid paying the taxes they advocate for everyone else.
Look at what just the talk of raising taxes is doing to the economy – the recession keeps hanging on and unemployment remains high. What’s going to happen if they go and raise taxes on the very people they need to get us out of this? What they ought to do is make those tax cuts permanent, but there’s no chance of that with this gang of class warriors running the show.
I don’t know about you, but no poor person has ever given me a job.