Higher Taxes on the Rich Are a Precursor to Higher Taxes on the Rest of Us

October 30, 2012 06:40

Honest leftists are beginning to admit that their real target is the middle class.

by Daniel J. Mitchell at Cato @ Liberty


President Obama repeatedly assures us that he only wants higher taxes on the rich as part of his class-warfare agenda.

But I don’t trust him. In part because he’s a politician, but also because there aren’t enough rich people to finance big government (not to mention that the rich easily can alter their financial affairs to avoid higher tax rates).

Honest leftists are beginning to admit that their real target is the middle class. Here are a few examples.

In other words, politicians often say they want to tax the rich, but the real target is the middle class. Indeed, this is the history of tax policy. In a post earlier this year, warning the folks in the Cayman Islands not to impose an income tax, I noted how the U.S. income tax began small and then swallowed up more and more people.

[T]he U.S. income tax began in 1913 with a top rate of only 7 percent and it affected less than 1 percent of the population. But that supposedly benign tax has since become a monstrous internal revenue code that plagues the nation today.

The same thing is true elsewhere in the world.

Allister Heath explains for London’s City A.M. newspaper.

The introduction of income taxes around the world have tended to follow a very similar pattern over the past couple of centuries. First, we get generally low income tax rates, with most people exempt and with the highest rate only affecting a few people relatively lightly. Eventually, tax rates shoot up for everybody – including to crippling levels for top earners – and millions more are caught by income tax. The next stage is that the ultra-high tax rates for top earners are reduced to manageable levels – but ever more people are brought into the tax system, with the higher brackets also catching vastly more folk.

By the way, you can see that Allister makes a reference to tax rates being reduced for top earners. That’s largely because many politicians learned an important lesson about the Laffer Curve. Sometimes, the best way to “soak the rich” is by lowering their tax rates. Unfortunately, President Obama still needs some remedial education on this topic.

Allister then looks at some specific United Kingdom data revealing how more and more middle class people are now subject to higher tax rates.

The biggest change in the UK has been the number of people paying what is now the 40p tax rate: up six-fold in thirty years, from 674,000 in 1979-80, 2.5m in 1999-2000 to 4.048m in 2011-12. This number will jump again to around 5m in 2014, according to the Institute for Fiscal Studies. When Margaret Thatcher came to power, just 2.6 per cent of taxpayers paid the top rate; by the time of the next election, 16.7 per cent will.

If Obama and other statists get their way, we’ll see similar statistic in the United States. Higher income tax rates for the rich will mean higher income tax rates for the rest of us. Though I’m even more worried about a value-added tax, which would be a huge burden on ordinary people and a revenue machine for greedy politicians.

It’s worth noting, by the way, that the American tax code actually is more “progressive” than the tax codes of Europe’s welfare states. This is largely because we don’t pillage poor and middle-class taxpayers with a VAT.

P.S.: Since I mentioned the Laffer Curve above, I should emphasize that the goal of good tax policy should be to maximize growth, not to maximize tax revenue.

P.P.S.: And don’t forget that poor and middle-income taxpayers also will be hurt because slower growth is an inevitable consequence when tax rates climb and the burden of government spending increases.


Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy. Mitchell is a strong advocate of a flat tax and international tax competition. Prior to joining Cato, Mitchell was a senior fellow with The Heritage Foundation, and an economist for Senator Bob Packwood and the Senate Finance Committee. Full bio>


Also please consider:

Rich Pay More Than “fair share”

Has Obama Already Bankrupted America?

Obama’s Achievement – Gov’t Has Become Gigantic Wealth-Transfer Machine

Debt Jumps More Than $1T for 5th Straight Fiscal Year

Fair share? Every American’s share of debt up from $34,000 to over $50,000 under Obama

Oregon proves raising taxes on rich lowers revenues

Obama’s Soak-the-Rich Tax Hikes Won’t Work

Raising tax rates on the ‘rich’ lowers the tax revenues

Fair share? Every American’s share of debt up from $34,000 to over $50,000 under Obama

The rich DO pay their fair share

Ninety-Nine Years of Evil

Obama’s meaningless tax the rich solution funds one day of spending

Centerpiece Of Obama Re-election Campaign Is Far Left

Rick Warren Rejects Obama’s Socialist Redistribution

Paul Ryan: The debt crisis is coming

Supermodel Elle Macpherson Loves Obama: ‘I’m Socialist – What Do You Expect?’

Gov. Mitch Daniels: Debt ‘Will Lead to National Ruin’

Who Needs Robin Hood?

Obama’s Soak-the-Rich Tax Hikes Won’t Work

Oregon proves raising taxes on rich lowers revenues

With Obama taxes are about ideology not economics

Why Doesn’t Congress Understand How Dire Our Fiscal Situation Really Is?

Dems and GOP still arguing over bar tab on the Titanic

Paul Ryan explains his plan to save the country

Obama holds budget hostage to keep abortion funding, defend EPA tyranny

Obama deficit greater than entire Clinton budget

Democrat budget plan is bankruptcy

An economy that’s not growing and a debt that is

Stop Spending, Stupid

Reid vows to stand in the way of any efforts to reform Social Security

Depression Unavoidable

Double dip? Morris says yes

What Needs To Be Said About What Needs To Be Done

Money Trouble Ahead: 15 Indications That Bad Times Are About To Hit The U.S. Economy

Peter Schiff calls Fed Chairman Bernanke a liar

18 Reasons Why You Can Stick A Fork In The New Home Construction Industry

Is the Recovery “Self-Sustaining”? Here’s a Test

The liberal union dream come true – Detroit

Are We Broke?

Thanks again Barack – On Fiscal Matters, Estonia Beats U.S.

Return to Debt Mountain

CBO: Obama to Push Public Debt above $20 Trillion by 2021

Obama’s War on the Middle Class

Obama praises Chilean economic progress but leads US in opposite direction

Traveling the Road to Poverty

Marco Rubio on the “ridiculous” budget games

The Era of Entitlement

CBO: Obama Budget $2.3 Trillion Worse Than Claimed

Debt Problem: Who In The World Is Going To Buy The Billions Of Dollars Of Debt The U.S. Government Is Constantly Pumping Out Now?

Currency Meltdown Coming

Shaken: 10 Economic Disasters Which Threaten To Rip World Financial Markets To Shreds

Congress argues over bar tab on the Titanic

Pathetic: Debt Jumped $72 Billion Same Day House Voted to Cut Spending $6 Billion

Interest on national debt could triple to $2 trillion

Quantitative Easing: Our Tiger by the Tail

Economic growth to be cut in half by growing debt

Doomsday and Why America Should Not Default

The not enough spending cuts – $61 billion is 1.6% of one year spending

Should We Be Alarmed That The Biggest Bond Fund In The World Has Dumped All Of Their U.S. Treasury Bonds?

The Canary Is Dying and So Is Our Future

GOP admits budget cannot be balanced

The New Obamamath – can he even add?

What Are Republicans Waiting For?

Facing the New “Red Menace”

Monthly Federal Expenditures Topped $1 Trillion in February, Says U.S. Treasury

There Are Worse Things Than Government Shutdowns

And the Dead Beat Goes On

Rising debt to end dollar’s reign as world reserve currency

US economy to crash by 2037 – debt will soar to 800% of GDP

USA Incorporated – a Look at the Grim Financial Situation of the USA

Projected Debt vs. Potential Debt

The End Game

Eric Cantor on spending cuts, entitlements and Obama

Projected Debt vs. Potential Debt

The Debt-Ceiling Dance and the Annual Budget Ritual

Debt Held by the Public Nearly Doubles by 2021

Debunking debt ceiling myths

National debt – see how fast it grows

IBD/TIPP Poll: 70% Oppose Raising Debt Ceiling

Balanced budget amendment DOA?

U.S. Debt Crisis Could Explode at Anytime says former Treasury Secretary Rubin

Democrats seek help from lobbyists to keep spending up

On the Down Grade

The Cause and Evidence of Inflation

Reality Shatters Obama’s Happy-Talk Agenda

Even Donald Trump Is Warning That An Economic Collapse Is Coming

The Economics of the State of the Union

Ryan Calls for 20 Percent Off the Top for Domestic Agencies

Inflation is Here to Stay

Obama Picks a ‘Spread the Wealth’ Progressive Lawyer for Top Economist

Rand Paul’s first senate speech warns against compromise on spending

Housing policies caused financial crisis – Democrats cover up

$1,500,000,000,000 Budget Deficit: Is Washington Taking it Seriously?

Moody’s Says Time Running Out for U.S. as S&P Cuts Japan


The ‘Third Rail’ Gets Derailed

Our nation simply can’t afford President Obama’s failed leadership for much longer

Economist Marc Faber on where the US economy is headed

Victor Davis Hanson: “The Old Beneficiaries Are Not Going Quietly Into That Good Night”

Another new deficit record! $1.5 TRILLION

To save America from economic disaster, the GOP leadership must take courageous political risks

For the Nation’s Sake, Cut Education Spending

Fed to Print $600 Billion More as Home Prices in U.S. Declined 1.6% From Year Earlier

Republican response to Obama spending plans

State of denial

Economy News Nightmare: 20 Things That You Should Not Read If You Do Not Want To Become Very Angry

And the Debt Bomb Ticks On

The Plain Truth on our Fiscal Cancer

The True State of the Economy

Budget Deficit Accounting Fraud and the Off-Balance-Sheet Student Loan Scam; Time to Scrap Entire Student Loan Program

Proposed $2.5 trillion cuts don’t make a dent

90% of cities and states to go bankrupt within the next five years?

12 Economic Collapse Scenarios That We Could Potentially See In 2011

70% Expect $4-A-Gallon Gas by July – 49% clueless to Obama connection

DeMint warns of bankruptcy, draconian tax increases, and economic stagnation – offers plan to cut $2.5 trillion

National Debt now at $126,985 per taxpayer – total liability $1,013,695 per taxpayer

How to Freeze the Debt Ceiling Without Risking Default

Debt Clock

Our Choice: State Secession or Washington Debt Depression

Hoisington and Hunt Forecast 2011

Austerity In America: 22 Signs That It Is Already Here And That It Is Going To Be Very Painful

The Great Depression II

Is Obama lying about his focus on jobs and the economy?

There is no argument for continuing the Federal Reserve System – Thomas Sowell

Govt says no inflation but there are riots over food prices

US economy is just the best horse in the glue factory

WSJ’s Stephen Moore on economics

10 Things That Would Be Different If The Federal Reserve Had Never Been Created

US falls further in Index of Economic Freedom Due To Spending

Will the last one out of Illinois turn out the lights

Greenspan warns of bond crisis with continued debt

Will The Tea Party Congress Bring Recovery?

Name The City Where 28% Of Homes And 62% Of Businesses Are Vacant

Debt and Ruin or American Exceptionalism – the stark choice America faces

‘We are going the way of Greece and Ireland’ ~ Michele Bachmann

Rep. Paul Ryan ‘we really do have a fiscal disaster coming’

New Year’s Resolution: Stop the Fiscal Insanity

Reevaluating Pension Entitlements in the Public Sector

World food prices spike to all time high

60% property tax increases possible in Chicago from union pensions

“Alarm Bells Should Be Ringing in Washington, DC”

Is the national debt too big to estimate?

The Coming Political Upheaval

How Government Failure Caused the Great Recession

Will troubled states file bankruptcy?

17 National Debt Statistics Which Prove That We Have Sold Our Children And Grandchildren Into Perpetual Debt Slavery

As 2010 Comes to An End, Bad Economic News Continue

Illinois Governor Wants to Borrow $15 Billion to “Balance” the Budget; Illinois Total Unfunded Liabilities Exceed $200 Billion Already

No hope for bipartisan spending cuts?

The Working Poor

2011 – What’s Coming

The Shattered American Dream: Unemployed Workers Lose Ground, Hope, and Faith in their Futures

Ex-Shell president sees $5 gas in 2012

70% give Obama negative ratings on economic job

Balance the Budget Now

111th Congress Added More Debt Than First 100 Congresses Combined: $10,429 Per Person in U.S.

Sen. Tom Coburn ‘We must live within our means’

Cooking the Books: The 2010 Deficit Was $2.1 trillion

Alabama Town’s Failed Pension Is a Warning

Here’s The Triple Threat That Could Spin The Globe Into A Deeper Recession

Government Waste: 20 Of The Craziest Things That The U.S. Government Is Spending Money On

US as Argentina

10 Trends for 2011

The Federal Reserve: Aging Magician of the Welfare State

Say Bye-Bye to Consumer Spending

Financial meltdown in state budgets: Day of Reckoning

Late-Stage Animal Farm

The Market Is Overbought, Overextended And Overvalued

Expose the Public Pension Mess

When the money runs out

John Williams: Hyperinflation Will Start in the Next Couple Months

10 Signs That Confidence In U.S. Treasuries Is Dying And Financial Armageddon Approaches

The Only Thing That Will Save Us Now Is Fear Itself

Outlook for the economy – grim

US may lose Aaa credit rating with flawed tax deal

Is the GOP ignoring anti-spending message?

State and local pension shortfalls over $3.5 TRILLION

Will 2011 Be The Year The Von Mises Prophecy Comes True?

The Lesson of the Tax Deal and the Deficit: Teach Your Kids Chinese

Washington Orders Another Free Lunch

Obama’s Emerging Enabling Act

The Fed creates money out of thin air

Is the Fed losing control?

Persian Gulf Economists Are Giving Up On The Dollar, Encouraging Move To Gold

Fact, Fiction & Finally the Fix

The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments

OPEC: If America Wants To Devalue The Dollar Then It Better Be Ready For $100+ Oil

Soaring Gold and a Sinking Dollar Signal Trouble Ahead

Gold at $8,250?

Will the dollar’s death surprise you?

Factors that will Determine the Future

Senator Judd Gregg on the inevitable fiscal meltdown

Banking System is Hopelessly Insolvent

Top Republicans caution the Fed on printing money

Has the Fed Been a Failure?

A REAL SIMPLE explanation of how the FED is ruining your economy

Economic Suicide the Keynesian Way

Inflation is a sneaky tax

What’s Next? Buckle Up

Death of the Dollar

The Great Weaponless Conquest of America

Bernanke’s Cowardice Has Sealed Our Fate

Ben Bernanke and QE must be STOPPED

Federal Reserve celebrates 100 years of enslaving America

The Fed is running the country right into the ground as a result of their ignorance

Soros Bets on U.S. Financial Collapse

How Did A Single Unconstitutional Agency Become The Most Powerful Organization In America?

The Fed’s “War on Wealth” and the Risk of Default

This guy is in charge of the economy?

Beck: Devaluing the Dollar

Food, apparel prices rising

Fed to Buy Extra $600 Billion of US I.O.U’s

I have not yet begun to fight!

Fed Easing May Mean 20% Dollar Drop: Bill Gross

Hyperinflation Forecast

The US $200-Trillion Debt Which Cannot Be Named

A Society of Beggars? Obama Battles Reagan

Mad Fed Should Beware Unquantifiable Outcomes

Burning your money?

Global food crisis forecast as prices reach record highs

The Fed is lying about inflation

Dollar fall sparks stability warnings

Fed Wants to Hoodwink Public, Only Fools Itself: Caroline Baum

For Orderly Dissolution Of The Fed, Before It Does Us Even More Harm

Will the Fed Burn More of Your Money?

The Disgraceful State of Our Government

Is Keynesianism a socialist Maneuver?

Economic Forecasts and Why They Should Not be Trusted

Three Horrifying Facts About the US Debt “Situation”

Obama and Ben Bernanke Have Us Facing the Abyss

Bernanke Tells the Truth: The United States is on the Brink of Financial Disaster

Greenspan Says U.S. Creating `Scary’ Deficit as Borrowing Rises

Interview with Garland Tucker on “The High Tide of American Conservatism”

Fed Officials Mull Inflation as a Fix

The Psychopathology of Government and its Agents

A fair warning of where we are headed

The Feds’ Disease: Spending! (Part 1)

IMF Warns Western Economies Mired in ‘Near Depression’

With Obama taxes are about ideology not economics

Help Make A Difference By Sharing These Articles On Facebook, Twitter And Elsewhere:

Interested In Further Reading? Click Here