The rich deserve a tax cut

After their laudable effort to repeal and replace Obamacare failed, Republicans have been working hard on tax reform. They realize how essential it is to score at least one major legislative victory ahead of 2018 midterms, in order to have a decent shot at retaining control of the House and the Senate.

But, as you’d expect, they have been subjected to various demagogic attacks from all corners of the Democrat-media complex. Although, some of them have been about repeal of the SALT deduction, most of the ire has been focused on the rich getting most of the benefits under the House and Senate bills.

House Minority Leader Nancy Pelosi howled:

The American people deserve real, bipartisan tax reform that puts the middle class first. This Republican plan doesn’t do any of that. In fact, it’s a giveaway to corporations and the wealthiest.

Similarly, over at the New York Times, columnist Edsall lamented:

…“tax cuts for the rich” is no caricature. This year’s bill is already setting new tax avoidance schemes in motion as it becomes clear once again that a favor-the-rich, reward-the-already-affluent ideology is embedded in the Republican Party’s DNA.

These breathless and disingenuous denunciations are aimed at convincing you that the rich don’t pay their “fair share” of taxes, and that the proposed reform will further exacerbate the situation. They go as far as to characterize it as an “assault on the poor.”

Yet, the reality is exactly the opposite. What always goes unmentioned by critics of tax cuts is that the rich currently pay a highly disproportionate share of income tax. It becomes clear to anyone who takes even a cursory glance at tax distribution data. For instance, consider two of the Tax Foundation’s key findings gleaned from 2013 federal income tax data:

  • The top 1 percent (1.3 million filers) paid a greater share of income taxes (37.8 percent) than the bottom 90 percent (124.5 million filers) combined (30.2 percent).
  • The top 1 percent of taxpayers paid a higher effective income tax rate than any other group, at 27.1 percent, which is over 8 times higher than taxpayers in the bottom 50 percent (3.3 percent) [emphasis mine].

This means that if you are in the bottom 50% of taxpayers and someone in the top 1% earns thousand times as much as you do, he ends up paying not thousand times as much as you (which would be fair), but 8000 times. (Note that this data takes into account all the loopholes, deductions and credits.)

Let’s try to appreciate the disparity better by having a look at the numbers from a different perspective. Consider the chart below, which compares the share of income of a given income group to its contribution to income tax.

Half of Taxpayers Pay 97.2 Percent of All Income Taxes

As you can see, even though the top 1% earns only about 19% of the adjusted gross income, they end up paying 37% of the taxes. On the other extreme, the bottom 50% contributes only about 3% to tax even though they earn around 11% of total income.

This demonstrates that the rich aren’t getting away with murder, as the left wants you to believe. Instead, they are being soaked. The proposed reform aims at merely punishing the rich a bit less (although, probably to soothe the class warriors, the House bill that passed recently increases the top rate from 39.6% to 45.6% for some; the Senate bill thankfully doesn’t). Yet, liberal elites work themselves into a complete frenzy over how a vast share of the tax cuts go to the affluent, while never acknowledging the fact that this happens partly because of the way the rich are taxed disproportionately. Mick Mulvaney, Director of the Office of Management and Budget, took a stab at explaining this. He said:

People always ask all the time, ‘Why do you want to give a tax cut to the rich?’ Here’s the math. We have a progressive tax system, which means that if you make $1 million and I make $50,000, we both pay the exact same rate on the first, let’s say, $20,000. And then, from the next $20,000 up to my $50,000, and her next $20,000 to her next $50,000, we pay the same, I think it’s 12 percent of 15 percent, I can’t remember where the brackets are right now. And then she goes on to pay her higher rate on the stuff that she makes and I stop.

Well, if you want to give me, the middle class, a cut, take my 15 percent rate down to say 10 percent, and that gives the middle class a cut. Guess who else benefits from that, she does. She pays that same rate on the way up the brackets.

One disingenuous trick that liberals employ is claiming that the tax cuts constitute a redistribution of income from the poor to the rich (see Vox, for example). But the reality is that the current system constitutes an abhorrent and coercive redistribution from the wealthy to the poor, and merely decreasing the magnitude of it isn’t an act of redistributing in the reverse direction.

Contrary to what progressives claim to believe, redistribution of income cannot be justified by an appeal to compassion. Taking others’ money without their consent and giving it to the needy isn’t an act of kindness, donating your own money is (notably, conservatives do that a lot more, perhaps because they understand that taxation should be limited to funding the core functions of a government). It cannot be justified by claiming that the system is “rigged” either, as I explained in my last post.

Liberals also assert that decreasing tax revenue will add to the already swollen federal debt, and thus anyone who supports reform doesn’t really care about the debt. But, they conveniently forget that this is an issue only if the spending isn’t cut by an equal amount too. Remember, the Trump administration had already proposed a budget that quite drastically cuts spending in May itself. But when it came out, liberals ran around screaming bloody murder, which goes to show that the real issue they’re concerned about isn’t debt, but maintaining illicit wealth transfer to their preferred constituencies.

So, since there is no justification for the rich to shoulder an excessive share of the tax burden as they currently do, Republicans are entirely right in attempting to cut their taxes. In fact, I’d have loved them to go even further and support a flat tax system, under which everyone is taxed at the same rate. Still, the House and Senate bills constitute significant progress and I hope tax reform becomes law.

 

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On the Left’s favorite catchphrase “Money Isn’t Speech”

Since the Supreme Court dealt a blow to laws restricting money in politics in Citizens United v FEC and McCutcheon v FEC, it’s easy to spot a liberal conveying her displeasure by regurgitating a trite one-liner:

“Money isn’t speech.”

Well, take that Chief Justice Roberts – your court would certainly have decided otherwise, if only this piece of irrefutable insight were shared with it!

It would be easier to ignore such posturing, if a host of Democrats were not determined in undermining the First Amendment by rallying their base behind this slogan. Not kidding – forty-one Democrat Senators, including Harry Reid and Chuck Schumer, proposed an amendment to the Constitution that will override the free speech protections afforded by the Bill of Rights!†

So, let me explain why the proposition “money isn’t speech,” even though superficially true, does not at all serve the purpose liberals want it to.

Of course, money isn’t speech, in a literal sense. But, that does not mean Congress can limit the money one can spend on furthering her speech while not affecting her right to free speech. Communicating speech may involve distributing pamphlets, books and movies; and writing articles on websites, all of which require money. Speech isn’t sui generis, in this sense. Money is an inextricable part of our lives and plays an important role in helping achieve our interests.

Consider this: money isn’t abortion, either. But you cannot expect liberals to stay mum if Congress were to propose passing laws limiting expenditure on abortion, can you? Would they not go up in arms about the supposed right to abortion being infringed? The plain truth is: it is impossible to limit expenditure on something and not affect the right to it!

Some counter that speech does not necessarily require money – one can, after all, simply choose to talk face-to-face with others. This rejoinder is misleading on multiple levels. First, you can only talk to so many people that way. Yes, you could recruit others to do the job, but guess what: they may ask to be paid! Or, you might find a group of people ready to volunteer for your cause, if there is one. That brings me to the crucial second point: even if there is a way that permits you to disseminate your ideas in a cost-free or less costly manner (in relation to the way you chose), the government has no business mandating that you use it.

It might not appear to be self-evident that this is the case: but, the alternative is to allow the government to regulate which channels of communication people can employ in various situations or limit the reach of your message, a clear affront to the First Amendment’s letter and spirit. The abortion analogy can come handy again: would liberals find it okay if the government decreed that a person must use a cheap healthcare facility, or limited the amount of money she could spend getting abortions? No!

The other common argument – that you can use “free” services like Twitter or YouTube similarly falls under minimal scrutiny. Leave aside, for a minute, the plain but overlooked fact that the continued operation of these services requires private funding: the government simply cannot be trusted with the power to tell which media are “acceptable.” If you want to launch your own website, write your own book, or create your own movie, you should be absolutely free to do so. The availability of “free” services, which by the way are and should be under no obligation to carry your views, is no excuse to restrict you.

The right to free speech is one of the most essential and cherished rights the citizenry has. Any proposal to diminish it under the pretense of “leveling the playing field” or “curtailing money in politics” is an outrage. As always, the solution lies in having more speech, not less.

***

Read Senator Ted Cruz’s insightful op-ed in The Wall Street Journal and Charles Cooke’s piece, both castigating Democrats for their assault on the First Amendment.

The Senate Joint Resolution 19 proposes an amendment to the Constitution that says “Congress shall have power to regulate the raising and spending of money and in-kind equivalents with respect to Federal elections, including through setting limits on…the amount of funds that may be spent by, in support of, or in opposition to such candidates.” A book or movie may endorse a candidate, and thus would be subject to being banned or its distribution curtailed by the government. The Citizens United case was literally about FEC trying to limit the distribution of a movie criticizing Hillary Clinton.