Robert Reich: Increase Marginal Rates on Millionaires to 70%
Robert Reich, former labor secretary under Bill Clinton--and a fellow Dartmouth alum--isn't happy about the tax bill that advanced in the Senate yesterday and goes to the House for a vote today. The bill extends the Bush-era tax cuts for two years and reduces the estate tax, "both windfalls for the rich," according to Reich.
These measures, he wrote in a column yesterday, have nothing to do with what "average Americans are worried about." To Reich,
Most Americans are worried sick about their jobs and wages.
Most Americans were also worried about the possibility of a tax hike in the new year, following the possible expiration of the Bush tax cuts. Anticipating yesterday's Senate vote, even President Obama said that middle-class Americans “will no longer need to worry about a New Year’s Day tax hike.”
But the former labor secretary insists that the Senate tax bill "won't help" economic growth. Why?
The rich spend a smaller proportion of their incomes than everyone else. That's what it means to be rich -- you already have most of what you want.
Has Reich forgotten that investment--which tends to be what the rich do with their money when they're not spending it--leads to economic growth as well? He must have, because his next move is to propose a marginal tax of 70% on millionaires to pay for more government programs that he believes we "need" to grow the economy:
We need a new WPA to put the unemployed back to work. And an infrastructure bank to create jobs repairing the nation's crumbling roads, bridges, and water and sewer systems....
Pay for this by raising marginal income taxes on millionaires. Under President Dwight Eisenhower, the top marginal rate was 91 percent. I'm not advocating this, but a millionaire marginal tax of even 70 percent would also go a long way toward reducing the nation's future budget deficit.
Thanks to a fabulous report called Rich States, Poor States, we at least know what happens when states increase marginal rates on millionaires: millionaires move. They leave tax-hostile states for states with lower rates. A similar phenomenon would certainly occur on a national level: millionaires would find a way to avoid Reich's whopper of a tax.
So there goes the tax revenue Reich is counting on! As economist Daniel Mitchell has written for the Heritage Foundation, "The rich pay more [taxes] when incentives to hide income are reduced." Mitchell also points out that during the 1980s, after Reagan cut marginal rates across the board, "total tax revenues climbed by 99.4 percent."
And yet, Reich concludes:
At a time when the nation's job emergency cries out for bold solutions, Washington is giving us a variation on the same failed trickle-down economics [read: supply side economics] we've had for three decades.
Maybe Reich should revisit his history books. Some would say that until 2007, America experienced the longest period of economic growth in its history. So if supply-side economics worked then, then why not now?
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Comments :
Sep '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Better yet, compare those decades of growth in the United States to the growth rates (and employment rates) across Europe during the same years.
Oct '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
I would go further. Investment in capital, and combining that capital with labor, is the only thing that leads to growth. Not "growth" as in some GDP calculation (C+G+I+NE), but an increase in our ability to produce more with less.
Edited on Dec 16, 2010 at 7:58amRe: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Mark Belling Fan
Better yet, compare those decades of growth in the United States to the growth rates (and employment rates) across Europe during the same years.
· Dec 16 at 7:56am
True -- or compare the economic growth rates of states like California to those of Texas.
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
tms
I would go further. Investment in capital, and combining that capital with labor, is the only thing that leads to growth. Not "growth" as in some GDP calculation (C+G+I+NE), but an increase in our ability to produce more with less. · Dec 16 at 7:57am
Edited on Dec 16 at 07:58 am
Exactly. That Reich would have such a one-dimensional view of economic growth--spending = growth--makes me wonder if he's intentionally deceiving his reader, or is simply economically illiterate.
Oct '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
I can't stand this argument that "most economists would agree that tax breaks for higher income people are not stimulative, because higher income people save the money".
All savings are spent! If savings go to a bank, then the bank lends it to a business, and they spend it. If the savings are used to purchase stocks, those funds are used to finance a company's operations or buy equipment or hire people or expand. If a saver buys a municipal bond, those proceeds are used to pay for the salaries of teachers and police officers, and then they spend it.
What if a stock or bond is purchased on the secondary market? Then the seller of the stock or bond "spends" the proceeds. Maybe the seller is retired and uses the proceeds to pay for their expenses during retirement, or maybe the seller is a pension fund, which uses the proceeds to generate the cash necessary to send out pension checks; pension checks that are ultimately spent.
Even Michael Bloomberg correctly pointed this out on Meet the Press.
Sep '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Maybe all the evidence to the contrary is a little over his head. Sorry, couldn't help myself.
Jun '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
There is some historical evidence of high marginal rates inducing spending by the rich. The calculus is that an investment may produce a gain to be taxed at a high marginal rate or may produce a loss. In either event, the potential investor has to spend time and energy to hope to realize a gain. If the capital available for investment is plopped down on a nice yacht to be built in New Zealand or a Bentley built in the UK, immediate pleasure can be realized. This was the pattern in the UK when their marginal rates approached confiscation. Clearly consumption of this sort is at the expense of investment.
Edited on Dec 16, 2010 at 8:33amRe: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Or maybe he's sinking to a new low ; )
Metzger, are you a Randy Newman fan?
Sep '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Last I checked, the rich weren't climbing ladders to go to bed because of all the cash stuffed under their mattress.
It's bewildering to me how a so-called economist can claim spending is the ONLY economic stimulus. It's almost like they have an agenda or something.
Sep '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Well, in addition to Short People, You could also point to Lonely at the Top and It's Money that I Love in his case :)
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Liberals resolutely avert their gaze from what less partisan observers learned during the period of stagflation under Jimmy Carter. Like dogs trained to salivate when a bell is rung, they presume that stimulating consumption via government expenditures is the answer to every downturn. It failed in the 1930s and the very early 1940s, and it failed in 2009 and 2010. Until individuals, the states, and the national government find a way to reduce debt to manageable levels and we have a stable tax system that rewards investment and entrepreneurship, we are going to remain in trouble.
The tax deal has one virtue: it enables us to dodge a bullet. An increase in marginal rates at this time would be devastating. But, from an economic point of view, it has one grave vice: it lasts only two years. Everyone knows that everything will be up for grabs in 2012. That may be of advantage to the Republicans, but in the short term it will cost us economically.
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Reich is the strongest argument for installing signs in DC one only sees now at carnivals: you must be this tall to ride.
Jun '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Robbery doesn't get any nobler as the victims get wealthier. I don't understand where that liberal rationalization comes from. It's from Marx, I guess. It's not biblical. What's biblical, is appealing to the charitable nature in us all, including the wealthy, but not limited to the wealthy.
Jul '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Emily Esfahani Smith, Ed. :
And yet, Reich concludes:
Maybe Reich should revisit his history books. Some would say that until 2007, America experienced the longest period of economic growth in its history. So if supply-side economics worked then, then why not now? ·
Therein lies the rub: The contention of the Left that Supply-Side didn't work then, it was just a fortunate timing of the natural economic cycle. It's more important that you punish a citizen because they have something and someone else does not. Power is derived from confiscating tax dollars from one group and giving it to another. The idea that Government must do something! to provide jobs is the Rosebud of the left. Government exists to provide equal access to opportunity - not to provide the opportunity. The Left just operates out of a different playbook than the rest of us, where facts don't matter.
Sep '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
"The idea that Government must do something! to provide jobs is the Rosebud of the left."
Unfortunately, John, this is the rosebud of all politicians. Too many GOP candidates sound just like their Democrat counterparts. They talk about "fighting for you", "creating jobs", "move beyond the talk", and "taking action". I would prefer they would all just sit on their hands and leave me the heck alone!!
Jun '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
This is not accurate, either technically or literally. The money a company gets to finance operations through the equities markets comes from a broker or group of brokers that then recoup the money spent to buy the stock from the company by reselling that stock into the market. After the IPO the company only benefits indirectly from an increasing market share price. A high market share price allows a company to issue fewer shares for more money, if, and only if, the board of directors decides to re-enter the market by way of underwriting broker[s]. Companies cannot and do not sell shares directly into the market, they operate through underwriting brokers, who pay the company in advance for their shares. The daily trades that establish share prices and constitute the broad-based averages, but not necessarily the Dow Jones Industrial average (not broad based)" do not affect the company's treasury.
Jul '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Richard VanderHoek: "The idea that Government must do something! to provide jobs is the Rosebud of the left."
Unfortunately, John, this is the rosebud of all politicians. Too many GOP candidates sound just like their Democrat counterparts. They talk about "fighting for you", "creating jobs", "move beyond the talk", and "taking action". I would prefer they would all just sit on their hands and leave me the heck alone!! · Dec 16 at 10:33am
Agreed. But the Do Something! About Something! midset has two seperate approaches. The Left maintains that they will do the doing, and the Right maintains that their doing is to get out of the way. But they do indeed all glom onto Do Something-ism.
I concur, I wish that they would just sit on their hands as well. If they won't, perhaps we should sit on their hands for them...
May '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Reich hasn't forgotten anything. He just believes that as a matter of principle he who has much must have it given to he who has little.
I wonder, in real life, what his own tax return looks like. Do you suppose he files any deductions? It would be immoral for him to do so, wouldn't it?
Oct '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
Cas Balicki
This is not accurate, either technically or literally. ...The daily trades that establish share prices and constitute the broad-based averages, but not necessarily the Dow Jones Industrial average (not broad based)" do not affect the company's treasury. · Dec 16 at 10:47am
I don't think you read the rest of my post:
What if a stock or bond is purchased on the secondary market? Then the seller of the stock or bond "spends" the proceeds.
In other words, the company is not getting the cash from the sale of a stock on the secondary market, but the seller of the stock is. For example, a person contributing to a 401K is buying shares from a retiree who is slowly selling off his investments to finance his retirement spending.
Dec '10
Re: Robert Reich: Increase Marginal Rates on Millionaires to 70%
"The rich spend a smaller proportion of their incomes than everyone else. That's what it means to be rich -- you already have most of what you want."
If this were true in the sense that Reich means it, the rich would respond to a 70 percent marginal rate by not earning taxable income -- who needs it if you already have most of what you want and need little more spending money to make up the difference?
Of course, "rich" and "high income" are two different things. Either Reich doesn't understand that distinction, or he's betting that most Americans don't understand it and he can use their ignorance to political advantage.