The 12 Biggest Myths about Raising Taxes on the Rich

Robert Reich

Robert Reich Former U.S. Secretary of Labor, Professor at Berkeley

Some politicians are calling for higher taxes on the rich. Naturally, these proposals have unleashed a torrent of opposition – mostly from…the rich. Here are the 12 biggest myths they’re propounding: 

Myth 1: A top marginal tax rate applies to all of a rich person’s total income or wealth.

Wrong. It would only apply to dollars in excess of a certain level. The 70 percent income tax rate proposed by Congresswoman Alexandria Ocasio-Cortez would apply only to dollars in excess of 10 million dollars a year. The 2 percent wealth tax proposed by Elizabeth Warren would apply only to wealth in excess of 50 million dollars.

Myth 2 : Raising taxes on the rich is a far-left idea.

Baloney. 70 percent of Americans – including 54 percent of Republicans – support raising taxes on families making more than 10 million dollars a year.  And expecting the rich to pay their fair share is a traditional American idea. From 1930 to 1980, the average top marginal income tax rate was  78 percent. From 1951 to 1963 it exceeded 90 percent – again, only on dollars in excess of a very high threshold. Even considering all deductions and tax credits, the very rich paid over half of their top incomes in taxes.  

Myth 3: A wealth tax is unconstitutional.

Rubbish. Most locales already impose an annual wealth tax on the value of peoples’ homes – the main source of household wealth for most people. It’s called the property tax. The rich hold most of their wealth in stocks and bonds, so why should these forms of wealth escape taxation?  Article I Section 8 of the Constitution gives “Congress [the] power to lay and collect taxes.”

Myth 4: When taxes on the rich are cut, they invest more and everyone benefits, when taxes on the rich are increased, economic growth slows.

Utter baloney. Trickle-down economics is a cruel joke. Donald Trump, George W. Bush, and Ronald Reagan all cut taxes on the rich, and nothing trickled down. There’s no evidence that higher taxes on the rich slows economic growth. To the contrary, when the top marginal tax rate has been high – between 71 to 92 percent – growth has averaged 4 percent a year. But when top rate has been low – between 28 and 39 percent – growth has averaged only 2.1 percent.

Myth 5: When you cut taxes on corporations, they invest more, and create more jobs.

Wrong again. After Trump and the Republicans lowered the corporate tax rate in 2018America’s largest corporations cut more jobs than they created. They used their tax savings largely to increase their stock prices by buying back their own shares of stock – enriching executives and wealthy investors but providing no real benefit to the economy.  

Myth 6: The rich already pay more than their fair share in taxes.

This is misleading, because it focuses only on income taxes – leaving out the large and growing tax burden on lower-income Americans; payroll taxes, state and local sales taxes, and property taxes take bigger bites out of the pay of lower-income families than higher-income.

Myth 7: The rich shouldn’t be taxed more because they already pay capital gains taxes.

Misleading. Rich families avoid paying capital gains taxes by passing their wealth on to their heirs. In fact, the largest share of big estates transferred from generation to generation are unrealized capital gains that have never been taxed.

Myth 8: The estate tax is a death tax that hits millions of Americans.

Baloney. The current estate tax, which only applies to assets in excess of 11 million dollars, or 22 million dollars for couples, affects fewer than 2,000 families.

Myth 9: If taxes are raised on the wealthy, they’ll find ways to evade them. So very little money is going to be raised.

More rubbish. For example, a 2 percent wealth tax, as proposed by Senator Elizabeth Warren, would raise around 2.75 trillion dollars over the next decade with very little tax evasion, according to research. A 70 percent tax on incomes over 10 million would raise close to 720 billion dollars over 10 years.

Myth 10: The only reason to raise taxes on the wealthy is to collect revenue.

No. Although these proposals would generate lots of revenue – and help us reduce the national debt while investing in schools, roads, and all the things we need – another major purpose is to reduce inequality, and thereby safeguard democracy against oligarchy.

Myth 11: It’s unfair to raise taxes on the wealthy.

Actually, it’s unfair not to raise taxes on the rich.  For the last 40 years, most Americans have seen no growth in their incomes at all, while the incomes of a minority at the top have skyrocketed. We’re rapidly heading toward a society dominated by a handful of super-rich, many of whom have never worked a day in their lives. More than 60 percent of wealth in America is now inherited.

Myth 12: They earned it. It’s their money.

Hogwash. It’s their country, too. They couldn’t maintain their fortunes without what America provides – national defense, police, laws, courts, political stability, and the Constitution. They couldn’t have got where they are without other things America provides – education, infrastructure, and a nation that respects private property. And to argue it’s “their money” also ignores a lot of other ways America has bestowed advantages on the rich – everything from bailing out Wall Street bankers when they get into trouble, to subsidizing the research of Big Pharma.

So the next time you hear one of these myths, know the truth.

***

Reposted from Robert Reich

Robert Reich served as the nation’s 22nd Secretary of Labor and now is a professor of public policy at the University of California at Berkeley. His latest book, Aftershock: The Next Economy and America’s Future, is now in bookstores. His earlier book, “Supercapitalism,” is out in paperback. For copies of his articles, books, and public radio commentaries, go to www.RobertReich.org.

Posted In: Allied Approaches, From Robert Reich

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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