Make The Millionaires Pay Again
Bipartisanship and unity abound. Seriously.
Need proof? How about the 60% of Republicans in favor of President Biden’s American Rescue Plan.
Still not convinced? Try this. On Monday, Sen. Elizabeth Warren, alongside Reps. Pramila Jayapal and Brendan Boyle, introduced the Ultra-Millionaire Tax Act modeled after the wealth tax Sen. Warren promoted during her presidential campaign. And though you might not think a progressive Democratic senator from the Northeast would garner much support from Republicans for a tax hike, the idea does in fact carry support from a bipartisan majority of American voters, including 53% of Republicans!
Despite this cross-country unity, politicians in Washington are already preparing the greatest hits of why we cannot raise taxes on the rich. We’ve heard this bad song too many times: rich people need to keep all their belongings because that’s good for the economy. Or, more often these days, they just sporadically shout “socialism” like it is a nervous tic. Even among progressive thinkers, there is more tempered-sounding pushback, not against the fundamental idea, but against the timing of it or the “hard” mechanics of how it will work.
We can direct the center-left to BrainyQuote for some inspiration and resolve to do the necessary work of correcting the income inequality that has run amok the last 40 years. May we interest you in some Dr. Martin Luther King, Jr., “The time is always right to do what is right.” Or the JFK is particularly delicious, “We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.”
If this isn’t enough to put the “it’s too hard right now” argument to bed, there are policy approaches outlined by experts who have done some thinking on this issue. And Sen. Warren has spelled out many of the implementation details in the text of the bill. Implementation of a wealth tax is no more complicated than all the schemes the wealthy and their accountants use to avoid paying taxes in the first place, so they can handle some complexity. The wealthy will be just fine–and still plenty wealthy!
You know who else will be just fine if rich people get taxed more? Everyone. At least this has been true historically as measured by Gross Domestic Product (GDP). Figure 1 shows from 1957–2017, the top marginal tax rate on income has ranged from 28 percent all the way up to 91 percent. During that time, the average annual growth in real GDP was highest when the rich were taxed more, significantly more, by the federal government.
Figure 2 tells the same story in a scatterplot on data from 1947–2015. The blue trend line on the graph is the correlation between employment growth and the top income tax rate. If taxes were bad for the economy we would expect to see that line sloping downward, but in fact it slopes upward because there are more years of strong job growth when the top income tax rate is high. Figure 3 tells a similar story, but replaces GDP growth with employment because, what is GDP anyway, really?
Here is the bottom line–ultra-millionaires will be fine if they have to pay 2 percent more of their wealth in taxes, 3 percent after they hit a billion. Their accountants will be able to figure it out, and if we fund the IRS appropriately like Sen. Warren’s bill proposes, the IRS will be able to figure it out as well. And if past is prologue, the rest of us will live in a society doing more good for more people in the economy and beyond.
