Posted by
Always To The Right on Friday, October 31, 2008 3:38:52 PM
For Obama, his plan is a matter of justice rather than economics. “Redistribution You Can Believe In”
Obama proposes a dog’s breakfast of tax credits, including a $500
refundable work credit that applies even to people who owe no income
taxes. The Internal Revenue Service would cut them a $500 check every
year. This essentially is a government payment dressed up as a tax cut.
It will be partly funded by new taxes on the top 5 percent. So Obama is
redistributing wealth, but in an eminently salable way. Call it
“redistributive change we can believe in.”
When in a Democratic primary debate Charlie Gibson of ABC News pointed
out to Obama that increasing the capital-gains rate in the past has
initially reduced revenue, Obama replied that he wanted the increase
“for purposes of fairness.”
But how unfair is the American tax
system? It’s already steeply progressive. IRS data show that the top 1
percent of filers paid 40 percent of federal income taxes in 2006. The
top 5 percent paid 60 percent. The top half paid 97 percent.
According
to the congressional Joint Economic Committee, these are the highest
tax shares paid by these income groups since 1986. The bottom half of
filers, in contrast, pays 3 percent. Millions of these people have an
income-tax liability less than zero, because they receive
already-existing refundable tax credits.
Experience shows that raising taxes on these earners doesn’t produce as
much revenue as expected, thanks to what economists call “the
elasticity of income” — i.e., people find ways around the Tax Man.
Regardless, there’s simply not enough money to be had from “the rich.”
This is why socialistic European countries have tax systems arguably
less progressive than ours. To fund their extensive welfare states,
they must resort not only to onerous income-tax rates, but to high
payroll and sales taxes paid by everyone.