To Soak the Rich, Cut Their Taxes

Like Lucy holding the football for Charlie Brown, the establishment appears to be wimping out with rumors of a 5-year phase-in of corporate tax cuts and an extra tax bracket for those making a million or more. There are demands that the trillions parked overseas be “invested” back in the economy, whatever that means, rather than, say, be used to buy back stock. Some RINOs like Sen. Collins, want to keep the death tax.

Our economic heart needs a jolt. It needs a defibrillator set to maximum when the timid are suggesting a cup of caffeine. As the saying goes, go big or go home. Those concerned with ballooning the deficit were largely silent as President Obama doubled the national debt. If you are conserved about ballooning the deficit, then cut some spending, geniuses. And if any of the rich feel they are undertaxed, well, they can write a check to the Treasury any time they feel like it.

We forget the lesson of the luxury tax. Designed to make the rich pay their “fair share,”, it aimed at the rich and hit the working class right between the eyes. The luxury tax was a 10% tax imposed in 1991 on cars valued above $30,000, boats above $100,000, jewelry and furs above $10,000 and private planes above $250,000.

Diehard class warriors like Ted Kennedy and then-Senate Majority Leader George Mitchell crowed publicly about how the rich would finally be paying their “fair share.” But it wasn’t the rich, but Joe Sixpack that suffered.

Boat building, a key industry in Messrs. Mitchell and Kennedy's home states of Maine and Massachusetts, was particularly hard hit. Yacht retailers reported a 77% drop in sales that year, while boat builders estimated layoffs at 25,000.

When you tax something, you get less of it, particularly when you’re talking about economic activity. Corporations in fact do not pay taxes, but pass on money to the government that comes from higher prices for their goods and services, lower wages, and benefits for fewer workers, and lower dividends to their stockholder and investors.

Even if corporations used repatriated money to just buy back their stock, the money still changes hands and that is called economic activity which, as Martha Stewart would say, is a good thing. Those selling the stock will put the money to good taxpaying uses even if it is just to buy those luxury boats and cars. There is no such thing as the unproductive use of money in the private sector. Government picked Solyndra. The private sector picked the iPhone.

President John F. Kennedy was right when he said in 1962: "It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the rates now. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."

President Kennedy knew that punishing employers really punishes employees. As the late former vice-presidential candidate and congressman Jack Kemp observed, "It's difficult to argue you are for working men and women when your policies prevent them from working by destroying the businesses that would employ them." As Kemp wrote in the New York Times in 1996, the historical record shows that tax cuts always increase revenues and growth:

Three times in this century the United States has significantly reduced the top marginal income tax rates. In the 1920's the top rate was lowered from 73 percent to 25 percent. Between 1921 to 1928, tax revenues rose from $719 million to $1.16 billion, an increase of over 60 percent. President Kennedy's tax cuts between 1963 and 1965 lowered the top rate from 91 percent to 70 percent. Over that period, revenues increased more than 16 percent.

In the 1980's, taxes were lowered from a top marginal rate of 70 percent to 28 percent. By the end of the decade, America's real gross domestic product surged by 32 percent and revenues grew by nearly 40 percent. True, nominal budget deficits were higher at the end of the Reagan era. But as a percentage of the gross domestic product, the deficit actually diminished during the 1980's.

Critics of Reagan’s tax cuts forget that much of the higher deficit was due to rebuilding a military decimated by Jimmy Carter and defeating the Soviet Union in the Cold War. Considering that and the liberation of Eastern Europe, it was a bargain.

As for the estate or death tax, it is less a revenue source than the final act of class warfare. Nobody, it is said, should be forced to visit the undertaker and tax collector on the same day. The death tax is double taxation and just because you can’t take it with you doesn’t mean the government should take it from you or your heirs.

It takes capital out of the cold, dead hands of entrepreneurs and puts it into the unproductive hands of government. Heritage Foundation economists once estimated that the federal estate tax alone is responsible for the loss of between 170,000 and 250,000 potential jobs each year. These numbers do not appear in employment statistics because the investments that would have created these jobs are never made.

People should not be punished because they work hard, become successful, and want to pass on the fruits of their labor, or even their ancestors’ labor, to their children We doubt that those who said give us liberty or give us death meant death to be a taxable event.   

It was John F. Kennedy who famously said that a rising tide raises all boats and, yes, those boats include yachts that “rich” people own. I prefer the word “successful” over “rich” and it is remembering even those yachts are built by workers who have homes and families and mortgages. Don’t punish the rich or corporations. No one ever got a job from a poor person. As Jack Kemp wrote in a TownHall.com column:

If you want to soak the rich, cut tax rates. As secretary of Housing and Urban Development, I spent a lot of time talking to people who lived in public housing. I never heard one person say they want to make the rich poor; they only want the opportunity to get ahead and get out of poverty. High tax rates don't hurt the rich, who can shelter their income; high tax rates just keep the poor in poverty.

You can't get rich on wages. The only way to get rich is to earn, save and invest.

A British wag once asked how we Americans enjoyed taxation with representation. This country was born with a revolt against unjust taxation. It can be reborn the same way.

Daniel John Sobieski is a freelance writer whose pieces have appeared in Investor’s Business Daily, Human Events, Reason Magazine and the Chicago Sun-Times among other publications.        

Like Lucy holding the football for Charlie Brown, the establishment appears to be wimping out with rumors of a 5-year phase-in of corporate tax cuts and an extra tax bracket for those making a million or more. There are demands that the trillions parked overseas be “invested” back in the economy, whatever that means, rather than, say, be used to buy back stock. Some RINOs like Sen. Collins, want to keep the death tax.

Our economic heart needs a jolt. It needs a defibrillator set to maximum when the timid are suggesting a cup of caffeine. As the saying goes, go big or go home. Those concerned with ballooning the deficit were largely silent as President Obama doubled the national debt. If you are conserved about ballooning the deficit, then cut some spending, geniuses. And if any of the rich feel they are undertaxed, well, they can write a check to the Treasury any time they feel like it.

We forget the lesson of the luxury tax. Designed to make the rich pay their “fair share,”, it aimed at the rich and hit the working class right between the eyes. The luxury tax was a 10% tax imposed in 1991 on cars valued above $30,000, boats above $100,000, jewelry and furs above $10,000 and private planes above $250,000.

Diehard class warriors like Ted Kennedy and then-Senate Majority Leader George Mitchell crowed publicly about how the rich would finally be paying their “fair share.” But it wasn’t the rich, but Joe Sixpack that suffered.

Boat building, a key industry in Messrs. Mitchell and Kennedy's home states of Maine and Massachusetts, was particularly hard hit. Yacht retailers reported a 77% drop in sales that year, while boat builders estimated layoffs at 25,000.

When you tax something, you get less of it, particularly when you’re talking about economic activity. Corporations in fact do not pay taxes, but pass on money to the government that comes from higher prices for their goods and services, lower wages, and benefits for fewer workers, and lower dividends to their stockholder and investors.

Even if corporations used repatriated money to just buy back their stock, the money still changes hands and that is called economic activity which, as Martha Stewart would say, is a good thing. Those selling the stock will put the money to good taxpaying uses even if it is just to buy those luxury boats and cars. There is no such thing as the unproductive use of money in the private sector. Government picked Solyndra. The private sector picked the iPhone.

President John F. Kennedy was right when he said in 1962: "It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the rates now. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."

President Kennedy knew that punishing employers really punishes employees. As the late former vice-presidential candidate and congressman Jack Kemp observed, "It's difficult to argue you are for working men and women when your policies prevent them from working by destroying the businesses that would employ them." As Kemp wrote in the New York Times in 1996, the historical record shows that tax cuts always increase revenues and growth:

Three times in this century the United States has significantly reduced the top marginal income tax rates. In the 1920's the top rate was lowered from 73 percent to 25 percent. Between 1921 to 1928, tax revenues rose from $719 million to $1.16 billion, an increase of over 60 percent. President Kennedy's tax cuts between 1963 and 1965 lowered the top rate from 91 percent to 70 percent. Over that period, revenues increased more than 16 percent.

In the 1980's, taxes were lowered from a top marginal rate of 70 percent to 28 percent. By the end of the decade, America's real gross domestic product surged by 32 percent and revenues grew by nearly 40 percent. True, nominal budget deficits were higher at the end of the Reagan era. But as a percentage of the gross domestic product, the deficit actually diminished during the 1980's.

Critics of Reagan’s tax cuts forget that much of the higher deficit was due to rebuilding a military decimated by Jimmy Carter and defeating the Soviet Union in the Cold War. Considering that and the liberation of Eastern Europe, it was a bargain.

As for the estate or death tax, it is less a revenue source than the final act of class warfare. Nobody, it is said, should be forced to visit the undertaker and tax collector on the same day. The death tax is double taxation and just because you can’t take it with you doesn’t mean the government should take it from you or your heirs.

It takes capital out of the cold, dead hands of entrepreneurs and puts it into the unproductive hands of government. Heritage Foundation economists once estimated that the federal estate tax alone is responsible for the loss of between 170,000 and 250,000 potential jobs each year. These numbers do not appear in employment statistics because the investments that would have created these jobs are never made.

People should not be punished because they work hard, become successful, and want to pass on the fruits of their labor, or even their ancestors’ labor, to their children We doubt that those who said give us liberty or give us death meant death to be a taxable event.   

It was John F. Kennedy who famously said that a rising tide raises all boats and, yes, those boats include yachts that “rich” people own. I prefer the word “successful” over “rich” and it is remembering even those yachts are built by workers who have homes and families and mortgages. Don’t punish the rich or corporations. No one ever got a job from a poor person. As Jack Kemp wrote in a TownHall.com column:

If you want to soak the rich, cut tax rates. As secretary of Housing and Urban Development, I spent a lot of time talking to people who lived in public housing. I never heard one person say they want to make the rich poor; they only want the opportunity to get ahead and get out of poverty. High tax rates don't hurt the rich, who can shelter their income; high tax rates just keep the poor in poverty.

You can't get rich on wages. The only way to get rich is to earn, save and invest.

A British wag once asked how we Americans enjoyed taxation with representation. This country was born with a revolt against unjust taxation. It can be reborn the same way.

Daniel John Sobieski is a freelance writer whose pieces have appeared in Investor’s Business Daily, Human Events, Reason Magazine and the Chicago Sun-Times among other publications.