The patriotic millionaires are at it again, insisting that they should be made — forced, I tell ya’! — to pay more in taxes to help pay for recovery from the coronavirus. No, it’s not good economics, but more than that, it’s not even what they themselves believe. It’s entirely possible to pay more taxes any time you want, and there’s no real evidence that the rich have been volunteering.
The bad economics argument is that right now really, really isn’t the time for tax increases. The Federal Reserve is creating money down in the basement as fast as it can — that’s what quantitative easing is — and Congress is throwing it out the door in unemployment checks, pandemic schemes, and sheer free cash. The justification is to stop the recession from turning into a depression, and raising taxes to cover all of this would be exactly and precisely the wrong thing to do. Near every strand of economic thinking tells us this, too.
But there’s more to it than that. Economists insist that we shouldn’t listen to what people say. If we want to know their true desires, we should instead watch what they do. Revealed preferences are more important than those expressed, and like a lot of economics, it’s just common sense wrapped up in expensive language: Actions speak louder than words.
See Massachusetts, which had a special higher tax rate one could pay, if desired. Opponents said the state shouldn’t have lowered it, so the state said you can pay the old, higher rate if you want. Very few did so. Norway has tried something similar. Years back, I asked the British Treasury how many had paid more tax than they needed to during the previous year. The answer was five people — yep, five whole people — and four of those were dead, leaving bequests.
The biggie here is that the country has had the “Gifts to the United States” account since 1843. It gets a few million every year. For 2019, it got about $5 million. By the action, not the words, of all 330 million Americans, including the likes of Bill Gates and Warren Buffett, who keep insisting that they themselves should be paying more on their vast fortunes, federal tax windfall last year was too low by just a few million.
Standard economics tells us that higher taxes now are a bad idea. Standard economics also tells us that wealth taxation is a really bad idea, as is taxing the income from investments. Perhaps that’s an argument for the wonks requiring specialized knowledge of the subject, so how about a simple argument?
When those millionaires and billionaires voluntarily pay higher taxes, they can bring us their thank you letters — yes you do get one, I checked — and then we’ll talk. Until then, they’re all talk and no action, or as the English say, “Fur coat and no knickers.”
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
