The New York Times published a fascinating piece last week on America’s wealthiest people using their influence “to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans.”
The effects have been dramatic: “Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent, which is just slightly more than the typical family making $100,000 annually, when payroll taxes are included for both groups.”
When polls show the American mainstream support higher tax burdens on the very wealthy, the public’s instincts on this are understandable.
But the Times’ Josh Barro published a related item on New Year’s Eve, noting that the trend changed direction, quite dramatically, in 2013 – and whether you think that’s a positive or negative development, you can attribute the shift largely to President Obama.
Data released by the I.R.S. on Wednesday shows that tax rates on the income of America’s 400 wealthiest taxpayers rose sharply to 22.9 percent in 2013, erasing a majority of the last two decades’ decline in their effective tax rate. […]The spike in the wealthiest people’s tax rates was mostly achieved … through initiatives from President Obama. Two laws that he championed became effective in 2013, raising tax rates on high earners and limiting the value of tax deductions they are entitled to take.
The two laws, of course, were the Affordable Care Act and the tax deal from late 2012 – remember the so-called “fiscal cliff”? – that raised taxes to Clinton-era levels on the very wealthy.
Why are billionaires so openly hostile towards the president that rescued the economy from the Great Recession? Because they were making out like bandits for the better part of a generation, and now they’re not.
Paul Krugman added yesterday, “The point, of course, was not to punish the rich but to raise money for progressive priorities, and while the 2013 tax hike wasn’t gigantic, it was significant. Those higher rates on the 1 percent correspond to about $70 billion a year in revenue. This happens to be in the same ballpark as both food stamps and budget office estimates of this year’s net outlays on Obamacare. So we’re not talking about something trivial.”
All of this is correct, of course, but let’s go one step further and note what happened after these policies took effect. Remember, Republican supply-side Economics 101 tells us that when government “punishes job-creators” with higher taxes, the economy suffers, job growth stalls, and investments end.
And yet, none of this happened. The wealthy paid more for the first time in many years, and the detrimental effects on the economy were non-existent. On the contrary, job growth soared in 2014 in ways we haven’t seen since the 1990s. We don’t yet have all of the data for 2015, but it’s on track to be nearly as good a year.
Asking more from those at the very top did not produce any of the consequences the right feared. How do conservatives explain this? As best as I can tell, they generally don’t even try.