Rich Elfers, “In Focus”

Can we all agree? Conservatives hate taxes, especially on the rich, and prefer to cut them. Progressives prefer to raise taxes.

There are many reasons for the differences, but it all gets down to the question of freedom. Conservatives believe freedom arises from few government regulations while progressives believe freedom comes from helping those on the bottom of the status spectrum to gain more power through more income and education.

Let’s examine some conservative views about taxes and contrast them with those of Robert Reich, economist, college professor, author and political commentator. Reich served under three presidents, two Democrats and one Republican. He was U.S. Secretary of Labor under Bill Clinton. The source of my information is Reich’s video entitled “12 Myths about Raising Taxes on the Rich.”

Myth No. 1: “A top marginal tax rate applies to all of a person’s wealth.” In other words, if there is a 70 percent marginal rate on income, 70 percent of their income would be taken for taxes.

Reich disagrees, saying the 70 percent tax would only kick in at annual income of $10 million or more. This is Alexandra Ocasio Cortez’s proposal. Elizabeth Warren’s proposal of 2 percent begins at incomes greater than $50 million. Only a small percentage of the population would be affected by these taxes.

Myth No. 2: “Raising taxes on the rich is a far-left idea.”

Reich says “baloney.” Fifty-four percent of Republicans favor raising taxes for those earning $10 million per year, according to a Jan. 24, 2019, Fox News poll. It was federal law from 1930-1978 that those in the top income bracket paid an average of 78 percent in taxes. From 1951 to 1963, the tax rate was 90 percent, again on dollars above a very high amount. Even counting all the tax deductions and credits, the rich paid only 50 percent of their top incomes in taxes. Yet, at these times of high taxes on the rich, the nation was prosperous and workers had good-paying jobs.

Conservatives calling tax increases “socialistic” is also deceptive. Socialism provides roads, fire and police protection, schools and military. Be careful of this word being used to confuse and to stir up emotions.

As Reich points out, it’s the rich who resist paying higher taxes. They’re the ones who come up with reasons why they shouldn’t have to pay more, using emotional words and phrases like “socialism” and “freedom” and being taxed at 70 percent of their income, which is not accurate. Words matter.

Myth No. 3: “A wealth tax is unconstitutional.”

Reich says “rubbish.” Property taxes are wealth taxes. The more valuable one’s house the greater the tax. Home ownership is a prime driver of wealth in the U.S. The wealthy hold most of their wealth in stocks and bonds. They are considered tax exemptions and not counted as income. But these forms of wealth escape taxation as income unless they are sold. Why should this be allowed? Article 1, Section 8 of the Constitution gives Congress power to lay and collect taxes. How, then, could a wealth tax be deemed unconstitutional by the wealthy?

Myth No. 4: “When taxes on the rich are cut, they invest more, and when taxes are increased, economic growth slows.” If the wealthy are highly taxed, they quit investing. It has a trickle-down effect on the economy.

Reich responds by saying, “utter baloney.” Trickle-down economics is a “cruel joke.” Ronald Reagan, George W. Bush and Donald Trump all cut taxes on the rich and money didn’t trickle down. Also, there’s simply no evidence that shows that raising taxes on the rich slows economic growth. In fact, during times of high economic growth between the 1950 and 2010, when the top marginal tax rate was high, for example, between 71 and 92 percent, growth averaged 4 percent per year. Yet, when the tax rate was low, between 28 to 39 percent, annual growth averaged only 2.1 percent.

Conservatives can offer rebuttals for each of these arguments and I hope they will. As an example, Brian Domitrovic, a conservative history professor at Sam Houston University, argued in another video entitled, “Why High Taxes Benefit the Rich,” and strongly disagrees. He argues that the 1950s brought a period of four recessions where the growth rate between 1949-1960 averaged only 2.5 percent. That’s true, but Reich used a longer period – from 1950-2010 – for his argument.

Our task as readers and listeners is to pay close attention to what statistics are being used for which time periods. Discernment and intelligence are increased when we can compare and contrast varying views. Frankly, Reich’s longer period gives a more accurate picture of economic growth.

Reich’s myth-busting arguments will be continued in a later column. If you haven’t yet seen your pet argument for or against taxing the rich, stay tuned.