Current support for raising income taxes on all people making $200,000 and more typically confuses that category of people with "the rich". Yachts and mansions are visualized, and if one is a bit more sophisticated, one imagines trust funds and the ability to hire lawyers and lobbyists to look after the rich person's business breaks. But in the real world folks with yachts and mansions--the truly rich--are not much bothered by the income tax for the simple reason that their money seldom rests on salaries; the truly rich are far beyond that.
But the people trying to become rich--the strivers we need to generate new businesses and jobs--are hit hard.
Surely one should not have a moral position on the rich. It's not morally bad to be rich any more than it is to be middle class or poor. It's also not morally good to be rich. It all depends, doesn't it, on how one uses his resources.
Unfortunately, while the income tax tends to hit strivers hard (and will hit them much harder come January, 2011), it still affords great advantages, such as tax breaks and incentives that are "subsidies for the reckless rich," as Ross Douthat writes today in The New York Times.
For example, President Obama, thinks he is stimulating the economy and saving the planet by providing "clean energy" money for taxpayers who invest in government-approved green businesses. His handouts are great for the favored businesses, of course, but the truth is that government has a terrible record of picking economic winners and losers. It largely wastes the money it "saves" the wealthy investor in, say, wind farms. Now, tax breaks for wind farms are controversial, because the waste is not yet obvious. But how about ethanol? How many billions have been thrown into already bulging bank accounts on that bootless enterprise? Ethanol, on balance, doesn't even help the environment.
If you want tax reform, you could get rid of these special interest boondoggles. Curb "spending on the well-connected," as Douthat says. He says conservatives (but I would say all people) "need to recognize that the most pernicious sort of redistributiuon isn't from the successful to the poor. It's from savers to speculators, from outsiders to insiders, and from the industrious middle class to the reckless, unproductive rich."
The purpose or reform is not just to raise revenues, but to make room for pro-growth income tax incentives for savers, investors, inventors, entrepreneurs and others working hard to rescue and redeem our economy. We have no stake in the mansions they may erect someday if they are successful. While we have some stake in the charitable foundations they may pursue eventually, we definitely have a large and immediate stake in the businesses and jobs they create. They take the risks and apply their genius and hard work. Let them fail (without bailouts) on their own or succeed on their own. Those who succeed will benefit us all. And may they enjoy their well-earned rewards.
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