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Because I signed on to a letter to president Obama asking him to allow the Bush tax cuts to expire on incomes over $1M a year I have been getting a lot of requests for interviews from the press. I made a brief appearance on the Lou Dobbs radio show, and today I almost got on Fox News (still might later this week I'm told). I also have a few requests from print reporters in the queue. The same questions seem to get asked over and over so I thought I'd write up a FAQ. Maybe that will save someone some time.
Q: Why do you want the government to raise your taxes?
A: I don't. I don't like paying more in taxes any more than the next person. But we have a stark choice before us: we can either raise taxes, or we can cut spending, or we can go the way of Greece and Iceland. All else being equal I would like to see us balance our budget by cutting spending, but I don't think that's going to happen. The Republicans were in charge for eight years, with control of both houses of Congress and the White House, and they oversaw the biggest expansion of government spending since F.D.R. And do I really need to explain why I'm not optimistic about the Democrats doing any better?
Q: If you feel this strongly about it, why don't you just write the government a check?
A: Because that won't do any good. The government is not a charity. It cannot and should not be run like one. Running a country is a team sport. The problems we are facing are too big for any one individual -- or even any group of individuals -- to fix alone. Whatever we do, we have to do it together.
Q: 45% (or something like that) of low-income individuals pay no federal income tax at all. In fact, they get money back from the government in the form of the earned income tax credit. Shouldn't we ask those people to do their fair share before we punish rich people for working hard and being successful?
A: Two answers. First, just because someone pays no federal income tax does not mean that they pay no taxes. Most wage earners pay payroll (social security) tax, medicare tax, and, if they buy stuff, sales tax. If they own a home they probably pay property tax too. So this idea that they are not doing their fair share because they don't pay "income tax" is, at best, playing games with terminology to obfuscate the truth. The problems we are facing are much too serious to tolerate that kind of semantic gamesmanship.
Second, we have to get beyond this argument about what is fair. Life isn't fair. Working hard improves your odds of getting rich, but whether you hit it or not has as much to do with luck (and your willingness to be ruthless and bend the rules) as it does with honest hard work. So fairness doesn't even enter into the equation. This is a practical question: we have to dig ourselves out of a very deep hole. It makes sense that we should ask those who are able to contribute more to do so.
Q: Doesn't it make more sense to let rich people keep their money so they can invest it and create jobs so we can grow the economy and get ourselves out of debt that way?
A: No, for two reasons. First, rich people are the result of a robust economy, not the cause. The United States is proof of this. The United States did not become the world's leading economic power because the rich elites of the world came here and invested. It became an economic power because it had conditions that attracted capable, hard-working but mostly poor (at first) people. "Give me your tired, your poor..." is not just an aphorism, it's the formula that led the U.S. to its heights of power. And what distinguished the United States at the height of its economic power was not that it had a huge cadre of rich elites that drove the economy, but that it had a robust and growing middle class. Whichever way the causality runs, it is indisputable that the country was stronger when the wealth was spread wide rather than piled high.
Second, you don't need rich people to drive investment, you need capital. Rich people are a source of capital, but they are not the only source, and they are not the best source. Institutional investors like university endowments and pension funds drive vastly more investment than high net worth individuals, and that is a very good thing because those institutions have broader fiduciary duties than individuals do, and so are more likely to invest in enterprises that benefit society as a whole rather than narrow individual interests.
Q: Won't taxing high income remove the incentive for hard work and risk taking?
A: No (though removing some of the inventive for taking certain kinds of risks might not be such a bad idea). Again, all we have to do to show this is to look at history. For most of the last 100 years, the marginal tax rate on the highest income brackets has been above 80%. In particular, in the 30 years after world war 2, when the U.S. was arguably at the height of its economic power, the top marginal tax rate was 91%. By way of contrast, in 1925 the top marginal rate was lowered from 46% to 25%. Four years later the stock market crashed. We've done this experiment before. I see no reason to believe we won't get the same results the second time around.
Q: Do you consider people who disagree with you unpatriotic?
No. Patriotism is not a zero-sum game.
[UPDATE:] Just got a new one:
Q: Why don't you just fire your accountant?
Q: You rich people have accountants so that you can find loopholes in the tax laws so you don't have to pay taxes. Why don't you just fire your accountant so that you can't find those loopholes and end up paying more taxes? (Or something like that. The question seemed a little incoherent when it was posed to me. I suspect something got lost in the translation between corporate overlord and junior reporter. But here's the answer I gave.)
A: I don't know about other rich people, but trying to weasel my way out of paying taxes is not why I have an accountant. The reason I have an accountant is that the tax code is so complicated that I can't do my taxes any other way. Hiring an accountant is the only way I can figure out what I actually owe.