Mitt and the GOP argue against President Obama’s Buffet Rule or any other tax increases for very rich people by claiming that if you tax the “job creators,” you both reduce revenue and destroy growth so that everybody suffers. This is complete and utter garbage, this is their “big lie,” but they have to figure out how to convince more people to vote against their economic interests than just the abortion/gay marriage/guns crowd. They need to con some people from the middle or they lose.
So that’s why I was thrilled to see an op-ed, in the Wall Street Journal no less, “High Tax Rates Won’t Slow Growth,” by Peter Diamond and Emmanuel Saez, that calls out the big lie. Diamond won the Nobel Prize for economics and is an MIT professor emeritus. Saez is an economics professor at U. C. Berkeley and winner of the very prestigious John Bates Clark medal. From the op-ed:
“The share of pre-tax income accruing to the top 1% of earners in the U. S. has more than doubled to about 20% in 2010 from less than 10% in the 1970s. At the same time, the average federal income tax rate on top earners has declined significantly. Given the large current and projected deficits, should the top 1% be taxed more? Because U. S. income concentration is now so high, the potential tax revenue at stake is large.
“But will taxable income of the top 1% respond to a tax increase by declining so much that revenue rises very little or even drops?
“According to our analysis of current tax rates and their elasticity, the revenue-maximizing top federal marginal income tax rate would be in or near the range of 50% to 70%…. Thus we conclude that raising the top tax rate is very likely to result in revenue increases at least until we reach the 50% rate that held during the first Reagan administration, and possibly until the 70% rate of the 1970s.
“But will raising top tax rates significantly lower economic growth? In the postwar U. S., higher top tax rates tend to go with higher economic growth — not lower. Indeed, according to the U. S. Department of Commerce’s Bureau of Economic analysis, GDP annual growth per capita (to adjust for population growth) averaged 1.68% between 1980 and 2010 when top tax rates were relatively low, while growth averaged 2.23% between 1950 and 1980 when top tax rates were at or above 70%.
“By itself, a suitable increase in the taxation of top earners will not solve our unsustainable long-term fiscal trajectory. But that is no reason not to use this tool to contribute to addressing this problem.”
I wish every voter would read this op-ed. Mitt and the GOP aren’t just wrong about taxing the rich, they know they are lying about it. We need to send them a message in November that “Populus vult decepi” may have been true in ancient Rome, but it isn’t true here, and it isn’t true now.