Home > Political > Another Argument for Higher Taxes

Another Argument for Higher Taxes

October 11th, 2010 Leave a comment Go to comments

In an entry I wrote last week I argued that higher taxes for the wealthy can actually stimulate the economy because it gives business-owners an incentive to invest their money back into the business. This morning I read an article by Dave Johnson of the organization Campaign for America’s Future which made the same argument but raised a very good point I left out:

When top tax rates were high it took time to build up a fortune. So businesses had to depend on the health of the communities around them to help keep them growing over a long period. They had to plan and act long-term. Businesspeople had to carefully build up solid businesses that served their customers and kept them coming back. And they had to train and hold on to employees because their experience was needed.

After the top tax rates were lowered people could reap huge fortunes in a hurry. This changed everything. It created incentives for people to do things that we can now see have harmed our country. Quick-buck schemes for short-term profit became the business model. It made more sense to run up high debt, cut for very high short-term profit or just sell off businesses rather than invest and build carefully for the long term.

This of course makes perfect sense, even if you understand nothing about economics. Because taxes are so much lower now than they once were, it takes much less time to make the same amount of money now than it did back then. Businesses had no choice but to keep growing, to maintain good relationships with the communities they were in, and to avoid excessive risk. They were in it for the long-haul, and always had to think of long-term consequences.

I can think of two possible rebuttals to this argument, one practical and one principled. The practical argument is that if we raise taxes on big business they’re just going to move overseas where taxes are lower and raise their GDP while lowering ours. I’d respond by saying that total GDP has very little correlation to standard of living, and while it may be lower in places like Europe they tend to have much more spending power for a variety of reasons. I’d also say that if Wall Street financial institutions want to take their economy-crashing business practices somewhere else, good riddance.

The principled argument is what you’re more likely to hear from typical conservatives—the idea that it’s somehow morally wrong to take more from those who earn more because you’re practically punishing them for their success. First of all, it’s not morally wrong because the people who work hardest in America also tend to earn the least amount of money, and the super-wealthy generally don’t work very hard at all—their money makes more money for them. Second of all, success doesn’t come in a vacuum. The most successful businesses would not have been successful were it not for the workers right down to the bottom rung of the ladder. It’s only fair to reward those at the bottom for making the success of those at the top possible, and what could be fairer than taking a larger percentage of what they earn to spend on things like education and infrastructure that benefit us all, including the super-rich?

Of course you’ll hear that the rich know how to spend their own money better than the government, but while the government certainly knows how to waste money I wouldn’t trust the wealthiest Americans to do the right thing either.

We need to reaffirm two core concepts in American society—the idea of having enough, and the value of social responsibility. The wealthy need to recognize when they have enough and to use the extra money they have to the benefit of everyone else, the people who made their success possible. A simple willingness to pay higher taxes is all we’re asking for.

Categories: Political Tags: , ,
  1. No comments yet.
  1. No trackbacks yet.