Common Sense or Class Warfare

Obama said yesterday, "Now I hear folks running around calling this class warfare. This is not class warfare, let me tell you something. Asking a billionaire to pay at least as much as a secretary, that is just common sense. That is common sense."



Here is a video that rebutts this argument. Dan Mitchell listed 5 reasons of "Why Class-Warfare Taxes are Misguided".  Here they are and my summary of them.

1. "Higher Tax rates discourage productive behavior." When you tax something you less of it. When you subsidize something you get more of it. Do we want to tax investments? That will shrink the amount of available money that can be invested in starting and expanding businesses. Investment creates jobs.
2. "High tax rates generate Laffer Curve Responses" People making over 200K a year paid 5 times more tax in 1988 under a lower tax rate than in 1980. In 2008, Obama was questioned on the rationality of raising capital gains tax when it was demonstrated that the government collected less money with it. Obama responded, "I would look at raising the capital gains tax for purposes of fairness"
3. "Higher tax rates on the rich don't help the poor. Class-Warfare types mistakenly assume the economy is a fixed pie... The best way to help the poo is faster growth. The chart shows that per Capita GDP has increased dramatically over time"
4. "High tax rates reduce competitiveness. Globalization increases the reward for good policy, and also increases the penalty for bad policy. Simply stated, it is now increasingly easy for labor and capital to cross national borders."
5. "Higher tax rates on the rich lead to higher tax rates on everybody." In 1913, when federal income tax started, the top tax rate was 7% applied to the top 1% of all citizens.  Now that top rate is much higher but so are the rates for everyone earning less.

One of Obama's arguments on raising the capital gains tax is that we would go back to the same rate as we had under Bill Clinton and we would gain the same kind of sucess in the economy. I would argue that our failure in the last decade had more to do with the repeal of Glass-Steagall and its consequences and other Crony-Capitalism trends over the last 20 years.

Here are a couple of articles that led me to this video.
- The Cato Institute Responds to President Obama's State-of-the-Union Address
- Warren Buffett’s Fiscal Innumeracy

-