"Tax the rich" - the toxic leftist mantra that will destroy the American economy
The rich already pay most of the tax collected
Kamala Harris and Joe Biden have in common a desire to “tax the rich”, a favorite mantra of leftist leaders, as if there are gobs of Americans who earn billions but pay little income taxes and by attacking this group of successful people, the socialist regimes of the Democrats can raise more money to buy more votes to retain power. It is a great story, if only it were true.
Reality is that the so-called wealthy already pay most of the taxes collected by the IRS and there is a point where raising their taxes even further is counterproductive. Perhaps the looniest ideas come from Elizabeth Warren who wants a “wealth tax” where people pay taxes on unrealized gains, and Harris has embraced this idea, contemplating a 25 % tax on unrealized gains, presumably part of each wealthy American’s annual tax filing.
Before digging into the details of where taxes are paid and by whom, it is useful to think about a 25% annual tax on unrealized gains from a purely mathematical perspective. If someone has $100 billion dollars of “wealth” they would pay a tax of $25 billion in year one; $18.25 billion in year two; and so on. Within twenty years, their wealth would largely have disappeared, virtually all confiscated by the state through the tax laws. That assumes the value of the assets making up the “wealth” reamains constant and the sale of assets to pay the tax doesn’t drive the market price of those assets south.
Wealthy people have more than just wealth - they have options. They don’t need to remain in the United States if its tax regime become hostile, and there are plenty of wonderful places to live that have more hospitable tax regimes - Bermuda, Costa Rica, Bahamas, or Belize to name a few. Enact a confiscatory tax code and watch the wealthy flee the jurisdiction.
The United States already has a progressive income tax code, with 76% of all income taxes collected paid by the top 10% of taxpayers. The bottom 50% of taxpayers pay little or no income taxes.
The mantra of “fair share” is pretty well always front and center in leftist tax theology. They either say the rich have to “pay their fair share” or “pay a little bit more”. They ignore the key question: “What is the fair amount to take from someone who has earned money and give it to someone who has not?” The real problem facing the Democrats is not that insufficient taxes are paid, but that not enough taxes are paid to fund their pet projects as they march America towards socialism or outright Communism.
It is an odd mix. Democrats in Congress get rich quite quickly, and their policy suggestions are mostly theater since they don’t want their own tax rates to rise materially. Nancy Pelosi and her husband have accumulated a reported $230 million wealth during her tenure in Congress, a remarkable feat given her salary is only a few hundred thousand dollars a year.
Riches garnered by members of Congress has led to false claims. Alexandria Ocasio Cortez was a bartender before being elected to the House of Representatives and now boasts a net worth approaching $29 million, according to a Facebook post, now thoroughly debunked.
But, there is no faster path to financial success than front-running acts of Congress when you are an insider to the legislation about to be proposed and can determine whether or not it gets passed into law. Both sides of the aisle have members which have made millions in the stock market notwithstanding the obvious conflicts of interest in enacting laws which affect the value of the stocks they hold. Motley Fool reports that Democrats and Republicans have outperformed the stock market in recent years with Democrats returns outpacing those of Republicans. Corruption in Congress seems bipartisan.
The tax act and budgetary changes to tax legislation have the most short term impact on share values and are ripe for abuse. While Democrats like to “tax the rich” in reality they prefer to become rich by tinkering with taxes.
Higher taxes are a drag on economic growth. Harris’ tax plans will, despite claims to the contrary by stalwarts like Goldman Sachs, trigger an economic decline as new taxes are enacted and the Trump tax cuts get repealed or simply expire at the end of 2025 as scheduled. That economic decline will meet Harris’ goal of lower inflation but will make it harder for struggling Americans to make ends meet.
Elect incompetent leaders and expect poor outcomes. Trudeau has proven that in Canada over the past nine years, and a Harris’ government will do the same to America. Hate Trump if you wish, but his proposed policies will do more to help American families than the proposals coming out of the Harris campaign.