Sunday, July 31, 2011

Tax the Wealthy

One thing that conservatives seem to find problematic is explaining why they don't like to raise taxes even on the wealthy. It makes them appear as if they only care about the wealthy (and "Big Business") and are kowtowing to this group to get campaign contributions that allow them to stay in power.

If the country needs more revenues, why not have those who can afford to pay more?

Conservatives believe this is usually a bad idea --raising taxes on anyone -- for practical as well as ideological reasons. Start with the latter, first -- conservatives believe that the power of government to confiscate private property, that is, your money, should be extremely limited, and tax policy shouldn't be based on whether or not elected officials believe you deserve your money. Down that road is peril for everyone.

From a practical standpoint, however, conservatives believe that keeping more money in the private sector grows the economy and creates jobs. Also, conservatives believe that unless you plan to do the tough work of overhauling the tax code, you're just not gonna get all those dollars out of the so-called wealthy that you think you are. That's because wealthy people can hire accountants. And tax lawyers.

Seriously, this is an empirical fact contained in something called "Hauser's Law" (named for the Hoover Institution's W. Kurt Hauser). In a nutshell, Hauser's Law says that tax revenue stays constant at about 19 percent of matter what you do to the tax rates.

As I said already, rich people hire tax accountants and tax lawyers to "game the system" and pay as little as they possibly can. Which is why, I suppose, Warren Buffett can famously complain about paying taxes at a lower rate than his receptionist. (As an aside, I always wonder why he doesn't just then write a check to the government for more, if he believes so strongly that he is undertaxed -- or at least, fire his tax accountants and let the chips fall where they may.)

Now, I'm not completely close-minded about raising some point. But unless someone can show me a new system that truly captures all that "greedy" Wealthy People's Money, a system that doesn't end up stifling growth and job creation, I'm skeptical.

That's why conservatives believe so passionately in cutting spending, not raising revenues, to balance the budget.

They don't believe raising revenues (taxes) will solve the problem. They believe it creates more problems.

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