A group of millionaires have made headlines recently requesting Congress to raise taxes on them. Many are Democrat donors including such leftist darlings as Ben and Jerry’s founder Ben Cohen.
These self-sacrificers say that it is vital to the economy and the nation’s financial help that Congress raise their taxes. The first question that comes to my mind is why does it take government impetus for these millionaires to pay more taxes? I distinctly remember George W. Bush once saying in a State of the Union address:
Others have said they would personally be happy to pay higher taxes. I welcome their enthusiasm, and I am pleased to report that the IRS accepts both checks and money orders.
I don’t see these millionaires who wrote the letter to Obama asking for a tax increase voluntarily shelling money out to the IRS, but instead they have decided to be political instead of really living as “Patriotic Millionaires for Fiscal Strength“.
Since the millionaires in question are Democrats, maybe George W. Bush isn’t the best example to use. Perhaps we should let one of their own – JFK – explain to them what lower taxes means as JFK did to the Economic Club of New York in 1962:
The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system — and this administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes to be enacted and become effective in 1963.
I’m not talking about a “quickie” or a temporary tax cut, which would be more appropriate if a recession were imminent. Nor am I talking about giving the economy a mere shot in the arm, to ease some temporary complaint. I am talking about the accumulated evidence of the last five years that our present tax system, developed as it was, in good part, during World War II to restrain growth, exerts too heavy a drag on growth in peace time; that it siphons out of the private economy too large a share of personal and business purchasing power; that it reduces the financial incenitives [sic] for personal effort, investment, and risk-taking. In short, to increase demand and lift the economy, the federal government’s most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures.
For all these reasons, next year’s tax bill should reduce personal as well as corporate income taxes: for those in the lower brackets, who are certain to spend their additional take-home pay, and for those in the middle and upper brackets, who can thereby be encouraged to undertake additional efforts and enabled to invest more capital.
In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country’s own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.
I repeat: our practical choice is not between a tax-cut deficit and a budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy, or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve, I believe — and I believe this can be done — a budget surplus. The first type of deficit is a sign of waste and weakness; the second reflects an investment in the future.
JFK understood it. Eisenhower in 1954 understood it. Lower taxes spur economic growth and overall investment which adds up to more jobs.
For all the rhetoric about Obama being the new millennium’s version of FDR, Obama is actually more like Herbert Hoover with “stimulus packages” and calls for raising taxes. Both Obama and his Hooverite millionaires should learn from history.
When Herbert Hoover was elected to President, he instituted his own set of government stimulus packages – government sponsored projects – and raised taxes. FDR doubled down on these ideas and helped keep high unemployment steady through the Great Depression. The chart below shows the stock market ups and downs 1929 – 1940.
Notice the stock market did not fully recover until 1954. Now, notice below that the second market plunge 1930 – 1932 is in direct correlation to income taxes being raised.
The big difference between Hoover and Obama is that Hoover did not have to contend with inflation resulting from the government printing money to buy back it’s own debt (QE1 and QE2) because the dollar was still pegged to the gold standard.
We have seen the effects of raising taxes on the “rich” has had on the US economy. Imagine the ill effects of these Hooverite policies with QE2. So Obama and his Patriot Millionaires want this again? Then start writing checks to the IRS, why do you need the government to tell you to do it? I guess money doesn’t buy you everything – including IQ.
Crosspost from Downstate Illinois Advocate