Bartlett: Raising Taxes on the Rich -- Not Whether, But How • TaxProf Blog

New York Times, Raising Taxes on the Rich: Not Whether, but How, by Bruce Bartlett:

Last week, the Senate rejected proposals by both Democrats and Republicans to pay for an extension of the 2% temporary payroll tax cut enacted a year ago. The Democratic plan to finance it with a 3.25% surtax on millionaires garnered significantly more votes than the Republican plan to cut the number of federal jobs and freeze the pay of federal workers. ….

Republicans like to pretend that cutting spending is economically costless, even stimulative, whereas raising taxes in any way whatsoever is so economically debilitating that it dare not be contemplated. This view is complete nonsense.

Careful studies by the Congressional Budget Office and others show that certain spending programs are highly stimulative, whereas tax cuts provide very little bang for the buck.

This would suggest that one of the worst ways to cut spending, from a macroeconomic point of view, would be to do it the way Republicans proposed last week: by cutting government employment. Judging by the table above, cutting taxes for lower- and middle-income people and paying for it with higher taxes for higher-income people, as Democrats have proposed, is unambiguously stimulative.

In any case, the Republican position is politically weak. Polls consistently show that a large majority of Americans favor higher taxes on the rich. … It is no longer possible to deny that there has been a sharp rise in the income and wealth of the ultra-rich while everyone else’s income has stagnated. Authoritative recent studies by the Congressional Budget Office and by Anthony Atkinson, Thomas Piketty and Emmanuel Saez prove that fact beyond question.

The point is not to punish the rich for being rich — Republicans routinely scream “class warfare” whenever anyone suggests higher taxes on the rich — but to raise revenue. If the rich don’t pay more, everyone else will have to. …

Recent studies by Peter Diamond and Emmanuel Saez and by A.B. Atkinson and Andrew Leigh find that increasing the top income tax rate would raise net additional revenue at least until it reached 63% and probably much higher.

Nor is it correct that low taxes on the rich are essential for economic growth. Recent studies by Dan Andrews, Christopher Jencks and Andrew Leigh and by Thomas Piketty, Emmanuel Saez and Stefanie Stantcheva show that while tax cuts for the rich have raised their share of aggregate income, they have not raised the rate of economic growth.

There are legitimate questions about whether the temporary payroll tax cut stimulated employment or if its expiration will reduce growth, about whether a surtax on millionaires is the best way to pay for it and how much additional revenue can reasonably be expected.

But the idea that the rich cannot or should not pay more should be dismissed out of hand. They can and must pay more; the only question is how best to do it.

About the Author

Paul Caron

Paul Caron was named Duane and Kelly Roberts Dean of Pepperdine University School of Law on June 1, 2017. Dean Caron joined the Pepperdine faculty in 2013 after serving as the Dorothy and Leonard Straus Distinguished Visiting Professor of Law in the spring semesters of 2010 through 2013. He served as Associate Dean for Research and Faculty Development at Pepperdine in 2015-2017. Before coming to Pepperdine, he was Associate Dean of Faculty and Charles Hartsock Professor of Law at the University of Cincinnati College of Law.

5 responses to “Bartlett: Raising Taxes on the Rich — Not Whether, But How”

AMTbuff

December 6, 2011

It’s incredible how many times over legislators can spend this same tax increase. Of course the first law to pass Congress actually gets the money, and the other uses get nothing.
Once the tax rate on the rich is maxed out, all further changes to taxes will have to be regressive. I wonder if proponents of higher taxes have thought of that…