Soak the Rich or Soak the Super Rich?
October 19, 2011
President Obama's original funding plan sought to specifically eliminate tax breaks for disfavored businesses like oil companies and hike taxes on families making over $250,000 a year. But Democratic senators from oil-rich states (such as Louisiana) and from those with lots of sub-millionaires (such as New York) nixed that idea, says Reason Foundation Senior Analyst Shikha Dalmia.
So Democratic Senate leader Harry Reid changed Obama's soak-the-rich scheme into a soak-the-super-rich scheme.
- His plan would have left everyone else's taxes essentially untouched.
- But super-rich people faced an additional 5.6 percent tax on every dollar of their unadjusted gross income beyond a million, pumping $450 billion into Uncle Sam's pocket over 10 years.
- If Reid had gotten his way, the top marginal tax rates in this country would have hit 50 percent, notes Howard Gleckman of the liberal Tax Policy Center.
- That's because the new surcharge would have come on top of the 0.9 percent ObamaCare surtax on the rich and the possible rollback of the Bush tax cuts for higher income brackets.
Separating the rich from the poor always involves some arbitrariness. But the Reid tax schema completely dispensed with ordinary understanding, classifying folks earning $999,999 among the middle class subject to ordinary tax treatment while labeling super-rich those earning $1 more.
Why Reid drew such a bizarre line is obvious: Class warfare has little resonance in a country with rapid income mobility.
- Indeed, a 2011 Gallup poll found that only 1 percent of Americans mentioned income inequality as the most important problem facing the country.
- That's because most Americans expect to move several quintiles up the economic ladder during their lifetimes.
- Placing people who occupy the top spot into a separate political class is the only class-warfare strategy that won't generate widespread opposition.
Democrats want to make millionaires the minority that everyone loves to hate. The failure of Reid's bill suggests that their campaign may have stalled. But that doesn't mean we won't be seeing this kind of class-war tactic crop up again in the future, says Dalmia.
Source: Shikha Dalmia, "Soak the Rich or Soak the Super Rich?" Reason Magazine, October 18, 2011.
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