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The Magic Bullet

Chris Van Hollen, who will be the ranking member of the House Budget Committee in the new Congress, was on Fox News Sunday this morning (transcript not yet available). To no one’s surprise, I’m sure, he decried extending the “tax cuts for the rich” and raising the estate tax from its present zero to 35 percent for estates over $5 million. That, too, according to Van Hollen, was an unconscionable giveaway of $26 billion to a few thousand families who already have far more than they need. John linked to Senator Bernie Sanders’s 8 1/2 hour rant on the Senate floor on Friday in which he said, less succinctly, the same. And Peter the same day linked to Congressman Alan Grayson (soon, mercifully, to be former congressman Alan Grayson) saying, again, much the same thing. Their animus against “the rich” is palpable and their adherence to the principle of high taxes on the rich (which dates back to Karl Marx in 1848) is religious rather than rational.

I carry no brief for “the rich,” although I’d be happy to be counted among them. But this all reminds me of a conversation I had many years ago with a close friend, now gone, on this subject. She was very liberal. (How liberal? In 1948, she not only voted for Henry Wallace; she went to the convention and worked in his campaign. That’s liberal.) I proposed a thought experiment. “Suppose,” I said, “there were an economic magic bullet — that if Congress would pass the necessary legislation and the president were to sign it, the effect would be to double everyone’s real take-home income. If you were living on $50,000 this year, you’d have $100,000 to spend next year.”

“Sounds great,” she said.

“But there’s a catch,” I answered. “The effect of the magic bullet would not double the take-home income of those earning over $1 million — it would quintuple it. In other words, the rich would make out far, far better than the average Joe. But there’s no way out, it’s all or nothing. Would you vote for the magic bullet if you were a member of Congress?”

“Certainly not!” she indignantly replied.

“Fine,” I said. “Now it’s six months later and you’re running for re-election. A constituent comes up to you and says, ‘I’m an English teacher at the local high school. I take home $50,000 a year. I have a daughter who needs serious orthodontics that’s not covered by insurance, my son has learning disabilities and has to be tutored, I’m driving a 10-year-old Buick that will have to be replaced very soon, and my mother-in-law will not be able to live on her own much longer. We never go away on vacation and seldom eat out. You voted against my earning an additional $50,000 a year because you objected to Mr. Bigbucks getting $5 million a year instead of $1 million. I don’t give a damn what the Rockefellers earn. I care about what I earn so I can take care of my family.’ What do you tell him, in order to win his vote?”

Her response: “It’s time for dinner.”

We have lowered the marginal rates on high incomes four times since the inception of the income tax — in the 1920s, the 1960s, the 1980s, and the 2000s. In each case, the result was a much more prosperous national economy, lower unemployment, and higher tax revenues for the government. If you do A (lower marginal rates) four times, and four times, despite differing economic circumstances, B (increased prosperity) happens, a rational person might conclude, at least tentatively, that B is the result of A. Not liberals.

As I said, high tax rates on the rich is a religious principle with the left. If the poor have to suffer because of it, so be it.



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