Thursday, January 3, 2013
Taxing The Rich
I've been quite amused this past week as Democrats rejoice at passage of the latest tax laws on the rich. You see, I learned two principle lessons from my college Econ 101 and 102, after poring through many a late night cram of Paul Samuelson's text and graphs thirty years ago.
1) When the government tax the rich they end up getting less revenue than before the tax was implemented.
2) There are two types of Ivy League law school graduates; those who major in tax law and those who major in government.
And while government lawyers are tapping a keg of beer in Scull and Bones, or in the back offices of the Harvard Law Review, the tax guys are sipping cognac and interning in high end New York tax palaces.
In other words, the rich always have smarter lawyers than does Uncle Sam.
Note the chart above. One can argue over whether or not the rich need to pay more than the current 70% of all tax revenue, but you can't argue with the facts: When the government raises taxes on the rich, the rich are on the phone to their smart tax lawyers and throwing up barricades to protect their loot.
So, who bears the burden of increased taxation to fund government spending? Yep, the same old "Joe Taxpayer" that pays the most of "sufferable taxation". So, after all the tax laws kick in this year, look for that red line above to decline as fewer tax receipts are recorded on those higher tax rates.
Today, we have 47% of America who pay nothing, we have the top two percent, the rich, who pay 70% of all taxes, and we have about 50 million truck drivers and retail workers and small businessmen bearing the burden for those deemed too poor to pay. The winners continue to be the rich and those who can either hide their real income or have learned to breed enough babies to put them in poverty status.
Each time a Democratic President or a Democratic Congress get ready to increase taxes we hear the same old mantra "the rich need to pay a little more". Again, I ask you to look at the chart above. Do you think Congress doesn't know that higher taxation leads to less revenue? Of course they know! But you can win elections if you make speeches poking at the rich. It makes the voter feel better.....for a little while.
Then reality kicks in and Joe Taxpayer sees less and less of his paycheck and says "why?"
Thomas Edison, Henry Ford, John D. Rockefeller and Walter Chrysler saw their net worth increase year after year over their lifetimes. Different today? Take a look at Bill Gates, Warren Buffett or the Walmart heirs; they get richer and you get poorer.
So, dear readers, if you don't understand the basics of economics, if tax law has you stumped, keep your funny New Year's party hats and those little blow toys. Celebrate the great tax hike on the rich with them.
But check back next January. Google that little chart I provided above. See if the rich paid any more in taxes and see if your taxes went down.