Class Warfare?

John Berry:

If Tax-Cut Lapsing Is Class Warfare, Let’s Fight, by John M. Berry, Commentary, Bloomberg: If letting top income-tax rates go back to where they were in 2000 is class warfare against the rich, I’m ready to snap to attention with my old M1 rifle on my shoulder.

What a ridiculous label, class warfare. It’s hardly aggression against any class to have a progressive income-tax system in which fairness and ability to pay are important considerations in setting rates for different income groups.

As far as the top tax rates are concerned,… The law already calls for today’s 33 percent rate to go to 36 percent and the 35 percent rate to rise to 39.6 percent, in 2011.

Why did a Republican Congress and President George W. Bush countenance the 2011 expiration dates in the 2001 tax-cut bill? It was one of several deceitful provisions that made rate reductions temporary to hold down estimates of revenue loss. Of course, the GOP intended all along to make the rate cuts permanent.

Obama would let the Bush rate cuts expire only for couples with incomes above $250,000 … and raise the rates for them on capital gains and dividends to 20 percent from 15 percent.

Unfair? I don’t think so, given these earners’ relatively greater ability to bear the added burden. There’s no doubt that a larger share of the nation’s income has become concentrated at the very top of the distribution.

The extra revenue would be used to help finance the government’s necessary role in dealing with the dangers of climate change and improving access to health care and control of its costs. …

The Obama plan would give most taxpayers small reductions in tax liabilities…

When Clinton proposed raising the top rates to 36 percent and 39.6 percent in 1993, there were plenty of predictions that the higher marginal rates would hurt Americans’ willingness to work and invest. Some economists argued that so many people would opt for leisure instead of work that the higher rates would raise no additional revenue.

Instead, a boom ensued in the latter 1990s… What did Bush’s lower rates produce? Mediocre growth, very large deficits and financial-market manipulation.

The reality is that tax rates aren’t nearly as powerful a force as some people think they are. …

Originally published at the Economist’s View and reproduced here with the author’s permission.

5 Responses to "Class Warfare?"

  1. Chris H   March 12, 2009 at 2:12 pm

    Mark,I have only been reading this blog for about 5 months and in no way consider myself an economist….I’m basically “Joe Plumber” trying to better educate myself, but take issue with most of what you have to say as it (imo) lacks “context”…..perhaps you’re a macroeconomist and context has no place, but offer the following:1. Most authors on this site say our current financial climate is much much worse than 1993, or 82 with no real precedent other than the Great Depression. So why look to the 90’s for any comparative examples?2. “It’s hardly aggression against any class to have a progressive income-tax system in which fairness and ability to pay are important considerations in setting rates for different income groups.” Who defines “fair”? Since when is the ability to create wealth unfair? Last time I looked these same unfair rich people are the job creators in this country…we still have (barely) the American dream for anyone to rise above their circumstances, create wealth, keep wealth, create jobs…why disincentivize this when these folks are what we need to get the 9% or 14% or whatever is the true number of unemployed Americans back to work? Please tell us WHY you think it is unfair?3. Who created this artifical ceiling that all couples making over $250,000 suddenly have “a greater ability to able to bear the added burden”. If the government really wants to be “fair”, they would recognize that $250,000 in New York or LA is far far different from making $250,000 in Cleveland or Houston. What aren’t you crying out for a system that reflects the cost side of the equation?4. “The Obama plan would give most taxpayers small reductions in tax liabilities”…most of the folks in the “rich” category are in AMT and these little write off perks for buying hybrid cars and the like are meaningless from a tax credit perspective.In summary, until you can start to properly contextualize and explain your comments, you are (imo) offering nothing more than hot air.

  2. Anonymous   March 13, 2009 at 6:10 am

    Ditto Chris. Mark looks like someone using this forum to promote his liberal politics rather than sound economic insights.

  3. Anonymous   March 14, 2009 at 2:05 am

    The “rich” are often business owners, managers or board members that control the future of hundreds or even thousands. These people are now fighting back to preserve the status quo. How? Wage freezes, wage cuts, furloughs, layoffs, health care benefit reductions, profit sharing plan reductions or elimination, 401K contribution cuts or elimination, pension plan reductions or elimination and the most devious of all price hikes on the products they produce. What does it mean to the middle class? Less not more. Class warfare is not good for America. America is great to a large degree because we as a people are motivated to achieve out of pride and for reward. Take the reward away and how many will still step up to the plate? Do we really want bigger government?

  4. No More Class Warfare Please   March 15, 2009 at 11:03 am

    Please read this article on the Individual Income Tax system and Class Warfare for an interesting fact based analysis of the fairness in the U.S. Individual Income tax system:

  5. Dr. Fred in PA   March 16, 2009 at 5:30 pm

    Dear Dr. Thomas:I am one of those evil rich people. I save lives every day and make my hospital approximately $65 million/year. I work long hours at very high stress levels with the threat of a lawsuit never far away. What the hell is FAIR about me paying more? Do I have more money at hand? Yeah. But again, what is fair about it? I wish those on the left who are stealing from me at gunpoint would at least have the guts to admit what they’re doing.