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Tax hikes on the rich don’t help

December 18, 2012
The Journal

To the editor:

As the debate over the budget and the impending fiscal cliff intensifies, we often hear the old Democratic mantra that "the rich have to pay their fair share." Obama would have us believe that by going back to the higher Clinton era tax rate on the highest income earners, the government would accomplish this. The only problems are that history teaches us a different lesson and Obama's plan would be counterproductive in the extreme for our economy.

According to a recent column in Investors Business Daily based on IRS statistics, tax revenue from the top one percent of income earners was up 23 percent from 2000 to 2007, approximately the same time frame during which the Bush tax cuts were implemented, which supposedly favored the wealthy. The bottom 50 percent paid 16 percent less over the same period. Moreover, the share of the tax burden borne by the top 1 percent increased by three percent while the share of the bottom 50 percent decreased by one percent.

"The rich got richer," some might retort. Well, not really. According to a Manhattan Institute study about disposable income released earlier this year, income inequality between the top fifth and bottom fifth of Americans stayed the same between 2000 and 2010. The gap between the two groups actually decreased slightly when measured from 2005 to 2010 during the Bush tax era.

So why do revenues often go up when tax rates go down one might ask? Under a harsh tax regime, those with higher incomes can always pay accountants to find tax shelters that are not cost efficient for middle class and lower income Americans. They can also move funds out of the country or simply refrain from business investment in which case incomes and tax revenue suffer. When tax rates are lower and simpler, those with excess cash can direct more savings toward better investments in this country without jumping through hoops, and the economy grows.

It's interesting (and great!) to learn that the Bush tax cuts did in fact disproportionately favor the bottom 50 percent. But the real question we should ask is what can we do to grow jobs and wages while not growing the prices of groceries and gas? Undoubtedly we will hear more class warfare rhetoric out of Obama and the Democrats. Who knows? Their failed ideas might even poll well. But the bottom line is "taxing the rich" more will not help the economy. Decreasing the burden of government via lower taxes, less regulation, and lower spending will. Let's hear it for those Republicans that are willing to stand up against Obama's counterproductive policies and for ideas that really work.

Josh Wilkening

New Ulm



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