2010 November 24 Wednesday
Liberal Elite Fail To Recruit Support For High Taxes For Rich
Ron Guhname says elite liberals do not understand why the majority do not share their desire to soak the rich with confiscatory taxes.
These elite liberals are completely mystified about why ordinary Americans don't want to tax the rich aggressively. These supposedly creative people even lack the imagination to come up with a good answer. So as the son of a retired maintenance man, let me help them out. The problem is that they assume that we rubes are naturally good at hating, so how in the world could we not want to stick it to the people who clearly deserve our hostility? They make the mistake of believing that we think like them.
The reality is that ordinary American assume that they are just as good as rich people; they are just people like ourselves. They are not cardboard monsters like liberals want us to believe. They are just folks.
Guhname gets this right. There's not a high degree of inter-class hatred. In fact, the biggest haters are the elite liberals. They hate both rich people and the people in fly-over country. That's another reason why most people do not want to join the elite liberals in resenting rich people: Why take your lead from an elite that views you with disdain? Rich people like the masses more than elite liberals do.
In the popular mind some of the most visible rich people are more like celebrities. Look at Donald Trump. I end up wanting him to have money so he can act like himself. He needs his big tower so he can say "You're fired!" and have it come from the big man. He's like a great character actor who plays a rich real estate tycoon in real life. What a great personality to have as a rich guy. Most real estate tycoons are probably far less interesting though.
Or take Steve Jobs. He doesn't spend a lot of money on clothes because his "suit" is a black turtleneck and blue jeans. He's got a huge ego. But if you had done what Jobs has accomplished wouldn't you? He's got more creativity in him than a thousand elite liberals. He's raised the bar for many companies in multiple industries. We all get to use better cell phones, music players, and personal computers regardless of whether we use Apple products because other companies compete to raise their products up to Apple standards. That's great. I can't complain.
Or look at Sergei Brin and Larry Page. Google has made the internet a much more fun and useful place. I use Google services many time each day to great personal benefit. I know many people who think Google is great. Socialist countries with high marginal tax rates and fewer rich people do not produce companies as innovative as Google or Apple or other greats in the American computer industry.
Do some rich people not deserve their wealth? Sure. But I am skeptical that government attempts to redistribute the wealth will push more wealth toward those who make big contributions with little rewards. More likely, the money would go to parasites who will become more destructive if subsidized more by taxpayers.
You've got it very wrong with this post.
First, the public strongly supports higher taxes on the rich. 30 seconds on google finds:
"Almost three-quarters of Americans think it is a good idea to raise taxes on people making more than $250,000 per year, according to the latest CBS News/New York Times poll.
In fact, two-thirds of Americans think the tax code should be changed so that middle-class Americans pay less than they do now, while "upper income" people pay more."
Even loaded questions proposing very high taxes on the rich gets positive results:
"People feel differently about how far a government should go. Here is a phrase which some people believe in and some don't. Do you think our government should or should not __redistribute wealth by heavy taxes on the rich?___"
49% yes 47% no
If the Obama administration proposed a tax of __50 percent or higher on the incomes of the very wealthiest millionaires__, would you support it, or not?
A 51% majority endorsed the significantly higher rate, 45% did not.
Second, you put "liberal elites" as somehow not including Steve Jobs.
"Do some rich people not deserve their wealth? Sure."
Just some? Between 2005 and 2007 40-50% of the profits of the S&P 500 were earned by financial companies.
What exactly did financial companies produce those years to make almost as much money as nearly every other large US corporation combined? Efficiently allocate savings and investment?
It's really funny how defenses of the very wealthy usually include just the same few examples like Steve Jobs and the Google founders.
Look at the Forbes 400, however, at you see mostly a bunch of people who inherited their money or made it in the parasitical financial sector.
In modern America, it is a lot easier to steal 100 million dollars than it is to earn it honestly.
People aren't motivated to tax the rich, especially not voters. Sure, you can get opinions. But this isn't a burning desire.
Same few examples: I chose names people had heard of. There are lots of far less known people who are starting up companies and getting rich off of venture capital start-ups. But if I mention, say, Eric Lefkofsky people will say who? Even if they read the recent NY Times article about him they'll forget his name next week. A small number of people will recognize Dean Kamen's name. But who founded eBay? I do not know. Who founded Genentech or or Applied Biosystems or Illumina or or numerous other biotech start-ups? Heck if I know. I at least know what Applied Biosystems and Illumina sell (DNA sequencing equipment). But only Craig Venter gets press attention about genetic sequencing. I know a VC who has started many software companies (he also served as CEO) for identity software. But he's invisible to the general public.
The vast majority of tech company founders and inventors are invisible to the public. But these are the people who make stuff we benefit from as a result of our more capitalistic market.
2005-2007: A financial bubble. The percentage of total corp profits coming from finance is way down now.
The issue is not so much taking from the rich, and giving what is taken from the rich to the poor, but to make sure that when capital accumulates in the accounts of the rich, this does not cause a shortage of investments that favor the majority. When there is a transfer of relative wealth from the majority to a small minority, then it is often the case that this actually slows down employment and investments that favor the majority. The best solution the government should adopt is not to take away the capital of the rich, but to start government-owned corporations that will undercut the monopolies that do not favor the majority, thusly providing goods and services for the majority. For example, despite the "glut" of housing in the market, there is in fact a shortage of housing for the majority who don't have the capital to buy the houses on the market. This can be remedied if the government simply builds free houses for the majority.
But not all rich people are that productive, at least not for the common man. Consider Westinghouse or GE or Comcast... they actively use their dominance to eliminate potential competition before it can ever get off the ground, while media arms of their business make sure nobody ever knows about it. Don't get me started on pharmaceuticals, the bonuses for psychs who just prescribe people medicine for the rest of their lives when it may not even be necessary. More research money goes to medicines that treat illnesses, while promising avenues to cure them are passed up. While there are exceptional people who become rich because of their talent, there are many more who were born into it and pay smart accountants and strategists to make sure that the money grows without any heed for the externalities.
Many people accept income differences because they hope to be rich themselves someday. There is a lot of churn and opportunity in a country where it is possible to become rich. Kill off the rich, and you kill off the possibility of a better life for yourself.
It is good for the economy to leave investment dollars in the hands of people who have proven ability to invest wisely, instead of taxing it away and putting it in the hands of politicians.
Asserting that the solution offered is to "tax the rich" seems like kind of a straw man to me, at least partially. (I do know ignoramuses who scream for exactly that, but they're stupid) What is needed is to regulate them so their power doesn't get completely out of hand. Since the early 2000s (maybe sooner, I wasn't old enough to pay attention before then), there have been constant examples of this turning up. Enron, sub-prime, it's all the same. When an opportunity to do something terrible to make money arises, some company, somewhere, will take advantage of it.
My point is that it isn't just about getting rich people to foot the bill. It's about countering their power. Even though it's probably way too late for that...
"People aren't motivated to tax the rich, especially not voters. Sure, you can get opinions. But this isn't a burning desire."
I don't know, sounds to me like you could say the same for extending the cuts for the rich: "Sure, you can get opinions to support extending the cuts for the rich, but this isn't a burning desire." I know middle class people who support extending the cap gains cuts, but I'd wager that not one of them has even bothered to call or write their congressmen about it.
1) Presently the maximum capital gains rate is 15%. This is the same rate as for those earning between $8400 and $34,000. A person earning $35,000 has a higher marginal rate than a billionaire.
2) The statement by Bob is accurate. Over 40% of all profits by the S&P 500 were made by financial services companies. In the 1970s it was around 15%, and has climbed ever since. An America where there's so much incentive to go into a field that produces nothing tangible is a weaker America.
3) Income disparity has soared since the 70s, too, with the top 1% increasing their share of income threefold.
4) There is little in the way of experience to prove that lower cap gains rates means higher economic growth. GNP growth was higher in the 80s and 90s, when the max cap gains rate ranged between 20-30%, than it was in the last decade, when it was 15%.
5) The current primary revenue sources for all levels of government are income & cap gains taxes, payroll taxes, sales taxes, and taxes on a single asset - the home. Except for the first, all of these hit the bottom harder than the top. Payroll taxes are capped at $106,800. For the very wealthy, most of their assets will be in stocks, not their homes, and they generally have to spend less of their income.
6) Economics of scale favors large corporations, and the fabulously wealthy who have built them. Eliminating the estate taxes and cutting the cap gains taxes would favor these people more than they already are by market forces.
7) It is the wealthy who disproportionately fund the political system in exchange for favors. It is corporations who throw their money almost exclusively at incumbents, at the expense of a more competitive political system. It is the wealthy who have consistently advocated for open borders, which has resulted in 12 million illegal immigrants and a nation where 13% of the population is immigrant. They have used their political sway to push market forces in their favor.
8) If the GOP is going to start asking citizens to make sacrifices in order to balance the budget, they're going to have to ask everyone to chip in. They undermine their chances at doing so if first they start by giving the rich a tax cut.
9) Are you suggesting that Brin, Page and Jobs would not have started their businesses if the capital gains rates were higher, or that maybe that they wouldn't have gotten the funding? I'd wager you're wrong. I can prove you're wrong, in fact, because Brin and Page started Google well before the 2001 Bush tax cuts, and Jobs started Apple before even the Reagan tax cuts.
Finally, as a Republican and an immigration enforcement zealot, I would ask why the hell conservatives should give away their support to the rich for free? They want lower taxes? Fine, we'll consider it when they stop opposing border enforcement. By giving the wealthy their tax cuts first we are giving away the best bargaining chip we have in the fight over social issues like immigration enforcement.
The Republican leadership has consistently fought for one thing: lower tax rates on the wealthy. That's why today, 30 years after the Reagan Revolution, abortion is still legal, affirmative action is more widespread, government is larger, the deficit is enormous, payroll taxes are higher, 12 million illegal immigrants are living here (plus 4 million anchor babies and 3 million people amnestied by the '86 bill), the public schools are more leftist than ever, there is no school choice...but the rich have lower taxes.
I agree people aren't that motivated to tax the wealthy, which is why Republican won in 2010 and many other times. But that's another issue entirely. They do want it to happen however, and if soaking the rich were a ballot measure it would probably pass.
I agree with you also that high taxes are a blunt instrument for social justice, they hit productive venture capitalists just as hard as Angelo Mozillo and Goldman Sachs partners.
I like the idea of a no-loophole inheritance tax that reaches 90%+ after a certain point, maybe 200 million. The decent super-rich like Gates, Buffet and Carnegie before them gave away their money anyway.
Then use all of that revenue to lower income tax rates.