Judging from the rhetoric of the media and the Democrats in Congress of late, the rich are piranhas feeding off the less fortunate. Democratic Rep. Ed Markey lambasted the 10‐year $800 billion GOP tax cut as “a bonanza for billionaires.” In recent weeks wealthy Americans have been labeled “the fortune few,” the “yacht club crowd,” and “the undeserving rich.”
Just a few years ago House Minority Leader Dick Gephardt, the ringleader of the class warfare crowd, unbelievably said that wealthy Americans are “the people who have won the lottery of life.” As Mr. Gephardt sees things, financial success is not the result of risk taking, hard work, invention or new business creation, but rather a result of being “fortunate.” America’s rich are allegedly those whose numbers came up on the roulette wheel.
Republicans should–no, they must–launch a vigorous counterassault against this greed‐and‐envy philosophy. Class envy is not just wrongheaded but dangerously subversive to the uniquely American idea that success and reward in this country are interlinked. Most of those who become rich in America do so because of their talent, thrift and motivation to excel.
Among all nations, the United States is closest to a meritocracy. More than two‐thirds of the richest Americans on the Forbes 400 list made their money themselves rather than having it given to them. Most of America’s rich are people of talent like Steven Spielberg, Sam Walton or Michael Jordan, not inheritors of wealth like Ted Kennedy and Jay Rockefeller. This explains why outside of Washington, D.C., and college faculty lounges, most Americans admire the wealthy. I recently saw a poll showing that Americans have greater respect for Bill Gates than Bill Clinton.
The Republicans’ $800 billion tax bills–particularly Bill Archer’s version that passed the House–are a triumph because they seek to reward and encourage achievement and success. Incentives matter. By lowering the tax penalty against work, investment and thrift, we will get more of it.
Take the capital gains tax. The left has a special allergic reaction to cutting the capital gains tax. But why? In 1997 the capital gains tax rate was cut from 28 to 20 percent and subsequently capital gains tax receipts have soared from $60 billion to almost $90 billion. Meanwhile, that tax cut increased stock prices. It contributed to the highest increase in productivity and private‐sector capital investment in a decade. Not even the most ardent supply siders expected such a bountiful gain from this tax cut. It is fair to cut the tax; it would be fairer still to abolish it.
The death tax is arguably the most anti‐family, anti‐economic growth levy in our entire tax code. It raises only 1.5 percent of all federal revenues but has created a whole industry of estate tax lawyers, life insurance schemes, foundation building and tax accountant finagling as Americans do all they can to avoid this graveyard tax. A study by the Institute for Policy Innovation finds that because the tax depresses economic activity, it actually loses money for the government. No wonder two‐thirds of Americans agree that the death tax should be abolished entirely.
The marriage penalty forces hundreds of thousands of working couples to face an annual $1,000 plus federal tax fine for taking their wedding vows. Almost all Americans agree the marriage penalty is one of the most inequitable features of our modern‐day income tax.
Ah, but wouldn’t all the benefits of the Archer tax bill go to the richest 10 percent of Americans? Perhaps. But the richest 10 percent of Americans pay well over half the income taxes. In fact, as the chart shows, when we compare income taxes paid with income received, we would conclude that under normal concepts of “fairness,” those groups bear far more than their fair share already.
One of the greatest economists and social philosophers of the past two centuries was Henry George. The world would be a vastly better place if those in Congress and the media called a “time out” from the verbal grenade lobbing against the tax bill and became familiar with George’s writings. Here is one of my favorite passages from George, dating back to 1879: