If we’re going to use Indiviglio’s logic, isn’t it plausible that a higher tax rate would cause some people to invest more, since it would take more capital to get similar returns?
Even if higher taxes caused them to blow their money rather than accumulate capital, that would help the economy. All those mansions in Aspen and Palm Beach don’t build themselves, you know, and they just might accumulate capital gains.
Did rich folks really spend more and invest less when Reagan was president than they do now?
Indiviglio piles on the plutocrat-friendly thinking here:
Taxing worker income doesn’t run into this problem: people have no choice but to work, unless they intend to rely on the welfare system. But those with extra capital always have a choice about how to use it: enjoy the money now through consumption or invest it to have more money to spend in the future. For this reason, the decision to generate income through investment should be more sensitive to tax rates than the decision to generate income from work.
Of course, we always hear about how higher income tax rates will discourage the rich from working. I guess that’s not true now. Does this mean Indiviglio thinks it would be cool to go back to the 70 percent top income-tax rate inherited by Reagan?
This is too clever by half. If the wealthy are taxed a higher rate, more money goes to the Treasury, the public’s common fund, which in theory as well as in practice provides tangible benefits to everyone. And if the issue is income inequality and job creation, if capital gains taxes are higher, then wage taxes can be lowered or benefits can be raised, giving workers more to spend, creating more demand in the economy and more pressure on wage rates. Greater demand would also create incentives for rich people to invest, no matter what the tax rate. And believe it or not, the government can invest too, in things like education and infrastructure that have long-term benefits that may just outweigh giving Groupon’s founders some cash-out capital
You’d think these ideas—tax billionaires less than secretaries, in Buffett’s formulation—would be politically untouchable, but the Post does a nice job showing how they came to be policy. It lays much of the blame at the feet of Alan Greenspan, though Bill Clinton and George W. Bush get a healthy dose, too, as do the Democrats in Congress, which is supposedly our labor party.
It’s hardly surprising when a millionaire’s club votes to favor millionaires, as the Post notes in its kicker, quoting Jacob Hacker:
“The amount of lobbying that takes place on tax policy from the deep-pocketed interests that have the most at stake is enormous,” Hacker said. “There’s very little representation on the other side.”
“Don’t forget,” he added, “that members of Congress themselves, particularly senators, are well off and they’re more likely to be sympathetic to the argument for low capital gains.”
This is important stuff, well played by the Post.