The Tired Canard of 'Tax Cuts for the Rich'

Behold a tax plan, or more precisely, two tax bills, one of the House signature, the other of the Senate. I’m told that there are all kinds of juicy (or disastrous, depending on whom you ask) bits in it, but what stands out to the casual observer is the top line. The House version defines four income tax brackets, topping out at a rate of 39.6%, while the Senate proposes seven, with a top rate of 38.5. Apparently, this is the best we can expect from a federal government supposedly dominated by small-government Republicans.

Yet the Democrats weep, gnash their teeth, rend their garments and exhibit other well-rehearsed expressions of impending Armageddon. 

“The Deficit!” they cry. “The Holy, Sacrosanct Deficit!”

Let us set aside for the moment the Laffer Curve effect, acknowledged by such right-wing conservative Republicans as John F. Kennedy, John Maynard Keynes, and Woodrow Wilson, that lower rates result in HIGHER revenue to the treasury. On second thought, scratch that -- let’s NOT set that aside. Quoting Thomas Sowell citing Benjamin Rader, “In 1921, when the tax rate on people making over $100,000 a year was 73%, the federal government collected a little over $700 million in income taxes, of which 30% was paid by those making over $100,000. By 1929, after a series of tax rate reductions had cut the tax rate to 24% on those making over $100,000, the federal government collected more than a billion dollars in income taxes, of which 65% was collected from those making over $100,000.“

Democrats shed nary a crocodile tear for the Deficit when it was their guy blowing it up for eight years. We may take seriously their claim that Uncle Sam lacks even trousers with which to cover his nakedness when ten of the top twenty wealthiest counties in the country (out of 3,144) are no longer within spitting distance of Mother Sow D.C.

“Tax cuts for the rich!” they chant, and the rats and cockroaches scamper in terror for the wall cracks and under the refrigerator.

Laugh or cry? Squishy, squeamish Republican politicians need to grow a few organs, beginning with a brain, extending down the spine to at least a couple of reproductive gonads, and aggressively smack down this tired canard whenever the Dems trot it out like some kind of trump card (pun intended).

Tax cuts for the rich? George Soros is not going to pay that 40% rate. Dianne Feinstein is not going to pay that rate. Hillary Clinton, Barack Obama, Elizabeth Warren, Maxine Waters, Michael Bloomberg, and the rest of the Democrat aristocracy aren’t going to pay it, because they already have their billions and the high-priced tax accountants to find them the loopholes, dodger schemes, and unproductive shelters where capital goes to die. Which is why they, the true permanent wealthy class, are laughing all the way to the bank about “tax cuts for the rich”.

The people who are paying that 40% rate are the men and women who might otherwise be giving you your next job or raise: small business entrepreneurs who have not yet accumulated cushy fortunes and high-priced tax accountants. Except that with that tax rate, instead of hiring ten new workers, they can only hire six; or if they hire more than six, each will have to live with less -- up to 40% less. Multiply that by a million business owners, and that’s another four million people who won’t be getting a new job or raise next year. 

Some accounting geniuses will say that’s not true, because all the business owner has to do is reinvest any surplus in new workers, thereby turning taxable profit into a non-taxable expense. But this is an argument from a bureaucratic mentality, a world where everything happens on a regular, predictable schedule, year in and year out. That is indeed the way Washington and Sacramento work, but it is not at all how entrepreneurial business works. The fickle winds of annual profit and loss do not guarantee any such regularity. The entrepreneur who made $500K this year may have made $250K last year and may make -- or lose -- a million dollars next year. He or she has been working 80 hours per week for 20 years and had many failures and loss years along the way. She is not a member of the privileged permanent wealthy class, getting fat in her sleep. Entrepreneurial business -- the leading driver of job growth -- is creative, risky, difficult and volatile. It grants privileges to no credentials, no pedigrees, no races, sexes, ethnicities, birthrights, or approvals from authority. 80% of startups fail within five years. Yet we feel we just must punish them whenever they succeed. 

The multi-billion-dollar quasi-monopoly corporations that the left owns now are laughing all the way to... themselves.  The progressive income tax code is their protection racket, ensuring no upstarts like Apple Computer in 1984 (enabled by Reagan’s tax cuts) ever disturb their comfortable status quo. 

Since Democrats are going to scream about the end of the world anyway if we do much as cut 1% from the budget of the Department of the Interior (hey -- I think something like that actually did happen), then why not give them something worth screaming about, like a Steve Forbes/Herman Cain/Ben Carson flat tax?

Timidity is a self-inflicted wound for which Republicans will pay at the polls next year if the economic resurgence sputters. Incremental progress toward the ultimate goal is good, but I remind my colleagues that one of the key reasons Trump got elected was that Americans got fed up hearing from the Bushes, the McConnells, the McCains, and the rest of the landed gentry of the GOP why it was their most well-considered judgement, don’t you know, yes, based on decades of selfless public service, that nothing could be done.

Howard Hyde is a Fellow of the American Freedom Alliance and author of the book Escape from Berkeley: An EX liberal progressive socialist embraces America (and doesn't apologize).

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