January 2, 2014
For the past 32 years, Americans have been living a lie. It's a lie
that helps out rich people and screws working people, and it's a lie
that needs to be called out.
The people promoting this lie - most
all of them rich people themselves - have been so good at promoting this
lie that pretty much everybody believes it. It's even asserted as fact,
without contradiction, in the mainstream media. But it's a lie.
lie is that raising income taxes on rich people and hugely profitable
companies hurts economies and even leads to unemployment. The truth is
that raising income taxes on rich people and hugely profitable companies
actually helps economies and causes companies to hire more and more
people, thus lowering unemployment.
What makes this lie
particularly relevant right now is that the French Constitutional
Council - their court that decides what's constitutional and what's not -
has just agreed with the new socialist government that it's totally
legal to raise the very top income tax rates on very wealthy individuals
and hugely profitable corporations to 50 percent (effectively 75
percent when you add in their other taxes like our FICA that funds
healthcare and retirement).
The lie that tax increases - like the
one the French Constitutional Court just approved - raise unemployment,
and that tax cuts reduce unemployment, is widely believed because, like
so many Big Lies, it has a small germ of truth at its center. That germ
of truth is that when people who spend all (or nearly all) of their
income every year - poor people and working-class people - have a little
more money in their pocket, they spend it. That increases economic
activity - there's more demand for goods and services. To meet that
demand, employers hire more workers.
So, you'd think that if you
cut the taxes on poor and low-wage people, they'd have more money, which
they'd spend, and it would stimulate the economy. That's true - except
for one thing, which is the germ of the lie that rich people use to get
everybody to think that tax cuts for rich people help economies.
here's that lie. While it would be true that if you cut income taxes on
the poor and low-end working people so they had more money in their
pockets it would stimulate the economy, it's impossible. Why is it
impossible? Because, as Rush Limbaugh and Mitt Romney point out as often
as possible, the bottom 47 percent of American workers make so little
money that they don't pay any income taxes. So there's nothing to cut.
When Republicans talk about tax cuts, they're not talking about tax cuts
for working people.
But what about cutting taxes on rich people?
Wouldn't that give them more money to spend - or even invest - which
would stimulate economic growth? That's the core, of course, of the tax
religion of Limbaugh (who has a reported $400 million contract) and
Romney (who was reported to have paid no taxes for years on hundreds of
millions in income). Cut rich people's taxes, they say, and the good
times will roll!
The thing that makes this a lie is that rich
people behave differently from poor and working class people. When they
get extra money from tax cuts, they don't spend it. After all, they
already have pretty much everything they may want or need.
as we learned about Mitt Romney in 2012, they open bank accounts in the
Cayman Islands and Switzerland and stash that money for future
generations. Or, they'll buy an American company, like Sensata, and move
it to China where they can get cheaper labor and pollute all they want.
Or, since they got the money relatively easily and don't worry so much
about losing it - after all, their basic needs are already covered -
they gamble with it. They call it "investing in real estate and the
market," but it's really just gambling.
None of this, of course, translates into America jobs.
And history backs this up.
1922, when Republican Warren Harding dropped the top tax rate from 73
percent down to 25 percent, it kicked off a gambling real estate and
stock market bubble that burst in 1929. President Roosevelt fixed that
by raising the top tax rate on the uber-rich back up to over 90 percent,
which led to over 40 years of stability and prosperity. Rich people
left their money in their companies, and only took 30 times what their
employees did as pay. The economy boomed, and the middle class
Then Reagan dropped the top tax rate down to 28
percent, leading within a year to the worst recession since the Great
Depression, followed by the Savings and Loans crisis.
took the top income tax rate back up to 39 percent and - presto - the
economy boomed. But then Bush junior came into office, cut it back down,
and we got another crash. And lots of unemployment.
It's a simple
point of fact. Four times since 1913 we've had big tax cuts on the
rich, and two led to major crashes, while the other two led to
stagnation for working people. All, however, made the rich a lot richer.
And when taxes have gone up? As author Larry Beinhart points out
"Since 1950 we have had five tax increases on the rich. Four out of
five times unemployment went down." Things got better, in other words,
for working people.
The flip side, as Beinhart points out, is
that, "Since 1950 we have had ten cuts to the top marginal [tax] rate.
Six out of ten times unemployment has gone up." Tax cuts for the rich,
in other words, screw working people at least 60 percent of the time,
and never help working people.
When Ronald Reagan came into
office, taxes on rich people were over 70 percent, and the American
middle class was the strongest it's ever been. Ever since the Reagan tax
cuts, however, we've been lurching from bubble to bubble, economic
crisis to economic crisis.
The French have figured it out that if
you want a stable economy, you need to tax the rich. That's why their
version of the Supreme Court just OK'ed a big new tax on the wealthiest
people in France. The countries of Scandinavia have been taxing their
billionaires and millionaires for over a half a century, and doing so
has worked great for places like Sweden and Denmark. And the history of
much of the 20th century shows that taxing the rich works right here in
So if we really want an economy that works, then we
need do just one simple thing: ignore the Republican lies and roll back
the Reagan tax cuts.
This article first appeared on TruthOut.
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