Raise taxes 5 percent? Now?

Raise taxes 5 percent? Now?

October 8th, 2011 in Opinion Free Press

What do you think about raising income taxes 5 percent now, in the middle of an economic crisis? The immediate reaction from most of us might be an emphatic "No!"

But what about raising taxes 5 percent on millionaires -- as President Barack Obama and some Democrats in Congress would like to do?

Most of us might relax because we don't know too many millionaires. We might assume that such a tax increase wouldn't affect us.

But what about the principle of the matter? Would it be fair to slap a higher tax on people who already pay a vastly disproportionate share of income taxes?

Of course, millionaires ought to pay their fair share. But they pay a 35 percent income tax rate as it is -- while nearly half of U.S. households pay no income taxes at all. No matter how rich anyone is, is it just for the federal government to tax away well over a third of that person's income -- on top of state and local taxes the person already pays?

And even setting aside the issue of justice, how about the practical argument against the tax? Is a big tax apt to encourage millionaires -- many of whom own small businesses that provide a lot of jobs to the American people -- to invest in expansion and job creation, or to pull back? Does the president think we need more jobs, or just fewer millionaires?

In a Washington Post-ABC News poll, 75 percent of respondents said they favor raising taxes on Americans with incomes over a million dollars. That might suggest envy, or the assumption that "soaking the rich" won't mean harmful consequences for others. But tax policy shouldn't be based on stirring up resentment, and soaking the rich isn't sound economics. It reduces economic activity.

Nevertheless, the president wants higher taxes on the wealthy to pay for a new $447 billion stimulus.

Given the failure of the last stimulus to boost employment, we cannot see why anyone thinks a new one -- funded by trying to convince the American people that the rich are the enemy -- will.