Washington has looked at the idea of taxing the rich to help pay for the healthcare reform package. The UK is taxing well-to-do bankers taking 50% of their 2009 bonuses above a threshold of $41,000.
The rich are an easy target. Many of them have continued to live well during the recession. A large part of the wealthy inherited their money and did nothing to create new businesses or build the national job base.
A new national poll from Bloomberg shows that most Americans want to see the government spend more money to salvage the economy. The survey also shows that “most are ready to hand the bill to the wealthy.” “The poll conducted between Dec. 3-7 “shows two- thirds of Americans favor taxing the rich to reduce the deficit.”
Taxing the rich and raising taxes on businesses always begs the question of the extent to which these taxes are regressive, particularly in an economic downturn. The wealthy have limited resources, even if it does not appear that way to the middle class or Congress. A 2% tax on people who make over $500,000 a year to cover healthcare and another 2% to help pay for jobs programs may be enough to keep a well-to-do person from spending much at Christmas. Retailers lose customers and states lose sales tax revenue.
Programs that tax highly profitable businesses or industries can have similar effects. The tax may help the Treasury cover costs of deficits created by federal spending to boost infrastructure projects that help create jobs. But, a business paying a new tax may choose to cut workers to maintain profit margins. Or, a company that might have added workers as the economy improves simply keeps its number of employees as it is.
Congress and the Administration may decide to take more money from the wealthy to cover costs of a number of programs. At first blush it seems like a good way to cut the deficit. That is only true until high taxes turn the rich into the middle class.
Douglas A. McIntyre