American Elephants

The Attempt to Redistribute Wealth—Usually Redistributes the Wealthy Instead. by The Elephant's Child

Hiking taxes on the wealthy, who already pay the largest percentage of all taxes, in a misguided attempt to redistribute wealth usually results in redistributing the wealthy instead. France’s new socialist president Hollande raised taxes on “the rich” in France to 75%, which resulted in outrage and the departure of French actor Gerard Depardieu for the slightly friendlier tax climate of Belgium, and then some Russian state. Former President Nicolas Sarcozy has talked of moving to London, as many French citizens have already done.

In Britain, 2012 found that as a result of a millionaires tax that raised the rate to 50%, the total number of millionaire tax filers plunged to 6.000 from 16,000 in fiscal 2010-2011 from the year before. The new tax was intended to raise about £2.5 billion more revenue. In 2009-2010 British millionaires come up with about £13.4 billion, at the 50% rate, the tax yielded only £6.5 billion. The press assumed that 10,000 millionaires had left the country, but the rich do have lots of options. Cameron has dropped the 50% rate to 45%, which may account for the French moving to Britain.

Meanwhile, here at home, the message is that the only thing standing in the way of a grand bargain to reduce our growing national debt is Republican intransigence on taxes. With Republican agreement to raise taxes on those with incomes over $400,000, liberals seem to have decided there is no need to cut spending after all. Why am I not surprised?

“Suddenly the clear and present danger to the American economy isn’t that we’ll fail to reduce the deficit enough; it is, instead, that we’ll reduce the deficit too much,” warns Paul Krugman. All this worry about debt and deficits is “an entirely contrived crisis,” writes Robert Kuttner in the Huffington Post. After all, as the New York Times explains, “deficits are actually a good thing when the economy is deeply depressed, so deficit reduction should wait until the economy is stronger.” “So,” sums up Robert Reich, “can we please stop obsessing about future budget deficits? They’re distracting our attention from what we should be obsessing about — jobs and growth.”

The danger is that we’ll reduce the deficit too much? Huh? Deficits are a good thing when the economy is deeply depressed, so deficit reduction should wait until the economy is stronger? Majority leader Harry Reid gave a rare interview on Sunday. Before they reduce spending, Democrats want still another tax increase. A tax increase, he said is his price for adjusting the terms of the automatic spending cuts scheduled to hit on March 1. Revenues were rising sharply at the end of last year, even before the tax increase. According to the CBO report for December, individual income tax receipts were up $42 billion during October-December.

Even the CBO suggests that the increase may be due to some shifting income from 2013 into 2012, because people anticipate paying higher taxes in 2013. People behaving rationally in their own self-interest? Yes.  They do.  George Lucas sold Lucasfilm to Disney for $4.05 billion, by closing the sale in 2012, probably saved around $352 million in capital gains taxes. Larry Ellison, CEO of Oracle will save roughly $58 million in taxes because Oracle pushed three quarterly dividends scheduled for 2013 into 2012 to avoid higher taxes on dividends. Wal-Mart accelerated the January 2 dividend into December 27. The Walton family will pay a 15% tax on that dividend instead of 43.5% which will save them something like $95 million. Las Vegas Sands declared a special one-time 2012 dividend, which will save CEO Sheldon Adelson $336 million. Jack Daniels also declared a special dividend saving the Brown family around $68 million. Al Gore sold Current TV to Al-Jazeera, but it was probably worth so little that there wasn’t a significant capital gain, but it makes a lot of income 2012 income instead of 2013 income. This is quite legal and sensible. Americans are entitled to keep as much of their own money as they can.

Since 1990 California has lost nearly 3½ million residents, the majority of whom have moved to Texas, Nevada and Arizona. The out-migration is blamed on California’s “chronic economic adversity.”its population density, and “constant fiscal instability”, according to the Manhattan Institute and the infallible U-Haul Index.

The rich have more options than the rest of us, and they can employ better accountants as well. Good reason to try to become rich. Most Americans don’t envy “the rich,” they want to become rich or richer, and for more than two centuries that’s worked pretty well. Class warfare and redistribution of income have never produced growth and prosperity, not in America, nor anywhere else. It’ a misguided idea to try to make everyone equal, though demagogues can make it sound attractive.

Oddly though, Barack Obama’s efforts to redistribute income and demands for a society that is “fairer,” have mostly ended in enriching his already well-to-do supporters with taxpayer subsidies. The NAACP has begun to notice. Unemployment rates for black Americans continue to climb, and unemployment rates for black youth are off the charts. Obama talks a lot about “fairness.” His policies don’t produce anything of the kind.

%d bloggers like this: