I meet all kinds of people, including frustrated liberals who think that many of our problems today would disappear if only the "rich" and "the corporations" paid more in taxes. Government obviously needs more money, or else budgets wouldn't keep going up, right? So we need to take a bit more from people who have more than they need and redistribute it.
So I try this experiment. I ask people, "How high do you think the top federal income tax rate should be?" I get a lot of blank stares, then they often say something like, "Twenty percent."
Then I ask, "What do you think the top income tax rate actually is right now?" This is a test, obviously, and it makes some people uncomfortable. But many finally answer something like, "Fifteen percent?" Maybe, "Twenty percent?"
I then explain that the top federal marginal rate of income tax today is 35 percent. Obviously, by their own valuation, that is too high.
In a couple of cases, people say, well, maybe that's just fine.
Then I ask if they are aware it is about to go up--January 1, 2011--to 39.5 percent. At that point, they start to perceive the truth: taxes are already too high. We are at the point where we start to discourage entrepreneurship and strangle growth--when what we desperately need is strong economic activity.
Then I point out that the new Obama Health Care Act will add a further "surcharge" of three percent to payroll taxes of the "rich"....Meanwhile, the Estate Tax (the "Death Tax") goes up to 55 percent next year on estates worth at least $1.2 million....Capital gains taxes are slated to rise from 15 to 20 percent.
And all of this comes before state and local income taxes in most states.
The truly rich can manage it. Their money is mostly not in salaries. The people who get soaked are those folks aspiring to get rich by building businesses and creating new jobs--the people on salaries or commissions. High income taxes thwart their ability to save and invest.
I have had some success with this socratic approach. Deep down, even many liberals don't believe in the policies of their leaders.
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