By Michelle Mortensen
Let’s talk taxes.
I know, it’s boring, but hear me out. Our state and nation are facing real economic uncertainty due to COVID, and in times of uncertainty, politicians always want to tax the rich to help the poor.
It makes for a lovely Robin Hoodesque fairytale, but as most adults know, fairytales are not fact. That never stops Democrats from proposing the idea though. Case in point, New York Mayor Bill DeBlasio wants to tax millionaires, fleeing his state in droves, to fix his budget woes.
Presidential hopeful Joe Biden wants to tax anyone making $450,000+ a year, if he’s elected. Of course, just like Robin Hood, Biden claims he would never hurt the lower and middle class. It’s a lovely campaign promise, but one he can’t keep because his math doesn’t add up.
First of all, the number of folks making $450,000+ a year, isn’t that high. Nationwide, it takes an annual income of $538,926 to be among the top 1 percent. Among the approximately 1.4 million taxpayers who meet this threshold, the average annual income is about $1.7 million — about 20 times the average income of $82,535 among all taxpayers.
Here in Nevada, the median household income is only $57,598. Only 4.7 percent of households in Nevada are high income households that make over $200,000 a year.
So, the majority of the population isn’t rich and there is literally no way we could tax the rich enough to pay for Biden’s progressive wish list.
Get this, if you took 100 percent of all the income millionaires made in taxes, it would only generate $8.9 trillion in additional revenues.
So that means millionaires and billionaires would have to stop receiving any income, for years, and give it all to the government, to make the progressive plan work.
A lot of people are under the impression the wealthy aren’t paying taxes at the rate us ordinary folks are, but that isn’t true either.
The top 50 percent of all taxpayers pay 97 percent of all individual income taxes already. That stat alone proves middle- and lower-class Americans would have to pay a lot more in taxes for the progressive plan to work. Someone once said though, that statistics lie and liars use statistics, so let’s prove that taxing the rich won’t work by looking at history.
Let’s start our history lesson by going back in time to the year 1990. It was the year we got Adobe Photoshop, Sinead O’Connor sang her bald little heart out, and “The Simpsons” became a staple on American TV.
It was also the year Congress and President George Bush made the decision to impose a 10 percent luxury tax on swanky goods to ease a $200 billion dollar budget deficit.
Hard to believe 30 years later we’ve done nothing to lower the budget deficit at all. In fact, the Congressional Budget Office expects it to skyrocket to $3.7 trillion by the end of fiscal year 2020. But I digress…let’s go back to 1990.
In 1990, the luxury tax on the rich backfired bigtime. The rich didn’t keep buying items with a much higher price tag at all. As a result, luxury suppliers went belly up, costing middle class Americans their jobs. Plus, the tax did not raise money for public programs; instead, it actually created a revenue loss as a result of the associated job loss.
For our next historical example, we have to travel further back in time to 1969. That was the year we walked on the moon, the year The Beatles last performed together, and the year Ted Kennedy killed a woman in Chappaquiddick and never went to prison for it. It was also the year 155 Americans allegedly used so many tax breaks, deductions, and other strategies, they wound up paying no federal income tax at all.
Congress was furious and immediately responded with the alternative minimum tax. The AMT basically requires rich folks to pay twice so they can’t ever find a loophole exempting them from federal income tax. It sounded perfect to Congress back in ’69, but Congress isn’t known for solving problems, but rather making bigger ones. Due to a major accounting omission, the AMT wasn’t indexed to inflation. As a result, it hit the middle class hard starting in the 1980s.
Congress didn’t deal with the problem until 2012 when it passed the American Taxpayer Relief Act. That was way too late for the 5.2 million middle-class Americans subjected to the alternative minimum tax since the 1980s alone. Even worse, the AMT doesn’t even help that much. According to IRS figures, the AMT collected about $38 billion in taxes in 2017. For perspective, we collected $3.4 trillion in federal taxes in 2017.
Now let’s time travel back to the present, where COVID-19 and unnecessary, extended, economic shutdowns have ravaged our economy hurting the well-to-do, middle class and those in poverty, alike. Will taxing the rich, or anyone for that matter, solve any of our problems?
No. We literally can’t tax and spend our way out of this. Why? Well, we’ve already proven there just aren’t enough rich people to tax.
Secondly, we’ve been on an unsustainable fiscal path for a long time. Remember back a few paragraphs ago when I said in 1990, we were only facing a $200 billion budget deficit. Well, over the past few years we’ve consistently added billions more. Thanks to COVID-19, we could reach a deficit close to $4 trillion this year. Then when you consider annual Social Security and Medicare shortfalls, it will rise from $440 billion to $1,656 billion over the next decade, there is literally no way to tax our way out of this giant hole.
Back in 2015, the Committee For A Responsible Budget projected we could balance the budget in 10 years if we taxed those making more than $400,000 a whopping individual tax rate of 102 percent. So, if the Democrats are going to make good on their progressive agenda, you will pay higher taxes, no matter what bracket you fall into.
So, what taxes will politicians go after? I presume we will see VAT taxes. Progressives love this European tax. They always tout how great everything is in Europe. The welfare state there is paid for by middle-class citizens, who are taxed a lot on everything they buy. I don’t think most Americans would tolerate paying $10 for milk. With VAT taxes, everything in your life costs way more.
While I make no bones about being a staunch, fiscal conservative, I should mention, we can’t “tax cut” our way out of this, either. I’m a believer in the Laffer curve. I support Keynesian economics. We are living in a supply-side Keynesian cycle right now. BUT in the Keynesian model, you tighten the belt and then pay back what you borrow. We’ve never paid back what we borrow. In fact, we aren’t even borrowing. We are literally printing money and inflating the dollar to function right now.
I close with this, not only will taxing the rich to fund the poor not work, it goes against everything this country was founded on. Our forefathers left England because they didn’t want an oppressive ruler taking away their freedom and taxing them to death. They led a revolution to get freedom. The cost was great but because of their
sacrifice, we live in a free country today. We live in the best, Democratic republic system in the world. We’ve proven capitalism works, yet all politicians want to do today is destroy it. They’ve lied to Americans saying free health care, free college, free everything … will make you free. If the government is in total control of everything you do, every dime you spend, everything you make, are you really free? Our forefathers didn’t think so. Neither do I.
The cost of freedom is high. We get closer to losing it every day. We better wake up and stop believing the fairytale, because before we know it, the fairy tales we tell our kids and grand-kids will be about the good ol’ days when we were actually free.
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Michelle Mortensen is an 8-time Emmy award-winning journalist, the host of “The Michelle Mortensen Show” debuting on KSHP 1400 AM September 14th and a former conservative political candidate. Michelle holds two degrees from Southern Methodist University and is the founder and chairman of the Building A Better Nevada PAC.
By Michelle Mortensen