The political wrangling over what to do with the Bush-era tax cuts that are set to expire has created another opportunity to observe the ideological difference in perspectives between liberals and conservatives on the issue of taxes. Most importantly, it highlights differences that go beyond differing blueprints for the economic future of the country and more to the contrasting viewpoints in how taxes should be used in modern America.
Out of the gate, liberals in the Democratic Party were resistant to extending the tax cuts in general. After the first rounds of debate it appeared that Democrats were willing to appease Americans with tax cut extensions for all but the wickedly rich. The problem with that plan was that the wickedly rich, which were deemed by the Obama administration as those with an income exceeding $250,000 also included arguably as much as half of all small-business owners. Despite the extensive political quibbling over what percent of small businesses will be negatively affected with higher taxes in a weak economy, there is an equally important question which is seldom addressed: What about the rich?
While many conservatives bring forth consumption tax proposals, these ideas receive quick and absolute rejection from the Democratic Party. Yes, liberals love the current system and pursue leveling taxes on the living and the dead with equal vigor. However, the left places their taxation efforts most forcefully on those who have achieved the highest economic levels in the nation. Why? If you listen to liberals such as Barack Obama, you will hear the argument that the rich can simply absorb additional taxes without any adverse effects. Under the surface of these arguments is a not-so-subtle hostility towards the rich. It is as if high income earners have dodged doing their fair bit in the tax department and liberals are just balancing the scales a little more in these hard times. Are they right? Are the rich deserving of a little less cash? Can the government do a few more wonderful things with a little bit more of their money? Let’s look at the economic facts.
In 2007 economist Stephen Moore addressed the same general set of questions and found that the top 1 percent of income earners pay 37 percent of the income taxes collected by the government. The top 10 percent of wage earners—that’s the filthy rich if you are wondering—pay almost 70% of total income taxes. The bottom 50 percent of wage earners pay only 3 percent of the taxes. Yes, in case the point has been overlooked, the rich pay the lion’s share of taxes in America and in doing so, received more money back from the Bush tax cuts than middle-class Americans who paid less in taxes, and the poor who don’t pay taxes at all. What is not talked about is what Moore observed as the final outcome of tax cuts regarding the rich. That is, when the wealthy got tax breaks they hired more employees as they expanded their businesses and in the end, they paid more taxes. More taxes to the tune of $100 billion recorded by the IRS in 2005. The number of tax filers who made a taxable income of more than $1 million went up from 180,000 in 2003 to over 300,000 in 2005. Yes, you guessed it, more people improving their financial income led to an increase in tax collections.
So, if tax cuts throughout history have created economic prosperity when enacted by presidents from John F. Kennedy to Ronald Reagan to George W. Bush, why do liberals still oppose them with all their might? The answer most likely has some complexity. It may be in part that liberals do not grasp the unintended consequences of economically strangling high wage earners that employ hundreds, if not thousands. It may be that liberals are inflicted with a form of economic nearsightedness that denies them the vision to see that in attempting to help the less fortunate at the expense of the wealthy, they are prolonging the economic misfortune for those that wish to find jobs in this country. Remember, a poor man or woman has never given anybody a job.
Unfortunately, with these possible explanations we must also entertain the conclusion that much of the aversion to tax cuts for high wage earners in America stems from a liberal hatred of economic achievement, the achievement our capitalistic society is founded on. Why else would liberals block programs that in the end would bring in more taxes? With economic prosperity come additional freedoms to buy what you want, to live as you wish, and to steadily turn away from a reliance of government intervention. This is not the Democratic way; in fact, it appears that they see taxes as a way to punish success, a billy club to beat down those that they see as having too much of the American dream. Small-business owners making over $250,000 a year may find themselves to be collateral damage as liberals attempt to attack the achievement of higher income earners. In the end, we all suffer.