Tooth-Fairy Tax Policy; High-Tax Advocates Are Either Credulous or Envious of Wealthy

The Washington Times (Washington, DC), November 29, 2011 | Go to article overview

Tooth-Fairy Tax Policy; High-Tax Advocates Are Either Credulous or Envious of Wealthy


Byline: Richard W. Rahn, SPECIAL TO THE WASHINGTON TIMES

President Obama said last week that we need to increase tax rates on the wealthiest Americans to obtain an extra $100 billion in tax revenue, and he blamed the failure of the supercommittee on the unwillingness of the Republicans to increase tax rates. Do you agree?

If you think increasing tax rates on the rich is the correct economic policy, then you also need to believe the following:

* That most government spending is cost-effective, and cutting 3 percent of it (approximately $110 billion out of the current $3.7 trillion budget) would be more damaging than increasing taxes by $100 billion on many of those who create jobs. When the extraction cost of taxing and borrowing is properly considered in doing cost-benefit analysis of government spending, many, if not a majority, of government spending programs fail the test. For instance, the Department of Education alone spends more than $100 billion per year, but there has been almost no improvement in test scores in the more than three decades the department has been in existence.

* That getting rid of the huge amount of waste and fraud in government programs, whether it is Medicare, Medicaid or defense, would do more damage to the economy than increasing tax rates on many highly productive people. Every year, many studies by government agencies and nongovernment groups show billions of dollars of waste and fraud within government, yet few government employees are fired or sent to jail, and little is done to correct the problems.

* That it is not appropriate for many of the programs the federal government now operates to be done at the state and local level for reasons of cost-effectiveness and for responsiveness to the people. The Constitution gives very few powers to the federal government but great power to the states, yet Washington spends hundreds of billions of dollars on programs for which it has no constitutional authority.

* That being rich or wealthy is the same thing as having a high income. Many wealthy people generate much of their income from nontaxable sources, such as state and local bonds, and would not be affected by the higher tax rates being proposed. But some people with high incomes, such as young doctors, may have negative net worth because of the debt they incurred to obtain their education, and yet they would be hit by these proposed taxes.

* That it is somehow fair to tax at a higher rate someone who works twice as hard as others who choose to take it easy. Many people who have high incomes work very hard and long hours, and they went through many years of schooling that their lower-income colleagues did not. Also, many high-income people produce new goods, services and jobs, which greatly benefit their fellow citizens, Steve Jobs being Exhibit No.

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