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Perhaps the biggest myth in American political life is that the wealthy don’t pay their “fair share.” And yet, class warfare isn’t merely at the center of the Democrats’ economic messaging and policy — it’s become the entire game.
Democrats have two new tax plans out, playing on the notion that the middle and working classes are unduly burdened by taxes. One is by Sen. Chris Van Hollen (D-MD), which would exempt anyone making $46,000 or married couples making less than $92,000. Then there is Sen. Cory Booker’s (D-NJ) Keep Your Pay Act, which would effectively eliminate federal income tax on individuals making below $37,500, and $75,000 for couples.
The United States is already home to one of, if not the most, progressive tax systems of any developed nation in the world. The wealthiest pay the preponderance of our federal income taxes. The Treasury Department estimates that the top 10% of households pay down around 80% of all federal income taxes. The top 1% pay 40%. The bottom 50% of workers pay around 3% of the federal tab.
But no politician, certainly none who wants to be in office very long, is ever going to advocate raising middle-class or working-class income taxes ever again, despite the ever-increasing cost of government and debt. While on occasion, Republicans will pass across-the-board tax cuts, known by Democrats as “tax cuts for the wealthy,” neither party will restrain spending.
Who cares, right? The rich can afford it.
There are many reasons to flatten taxes rather than make them more lopsided. Free-market economists, for instance, will tell you that it’s harmful to rely on a narrow tax base that makes revenue streams more volatile and vulnerable to the behavioral changes of a few people. And that’s true.
Others will tell you that in a healthy, free society, everyone feels the benefits and pain of government policy. If voters internalize the fact that income taxes will never rise, they are untethered from the cost of their political decisions. They become increasingly pliable to new and increased spending without any concern for its effects. Everyone simply expects someone else will pay, either future generations or their wealthier neighbors.
Me? I like to point out that it’s not your money, commie. Progressives believe they have first dibs on your property simply because you’re well off. It’s un-American.
Taxation has gone from being a means of funding communal needs, national projects, and defense to a means of technocratic wealth reallocation. In this regard, Democrats are quite open about their intentions. The goal is to create a European-style welfare state in the U.S., despite the average American enjoying a far better economy by virtually every quantifiable measure.
People are always surprised when I point out that the average household in Mississippi, our poorest state, has a higher GDP than the average British or German household. The constant doom-and-gloom of populist partisans who are jockeying for power obscures this reality.
Moreover, the contemporary Democratic Party, increasingly driven by progressives “democratic socialists,” is to the left of the mainstream European ruling parties.
Take their favorite nation of Denmark, which Sen. Bernie Sanders (I-VT) says is the place where the “American dream” is actually being realized. The top statutory personal income tax rate in that small country kicks in at 1.3 times the average income. It is 56%. Or, converting that number to our own economy, it would mean taxing everyone who makes around $65,000 or more at 56%. That’s not even considering the value-added sales tax on most products.
All of which is to say, everyone pays for the welfare state in Europe.
Denmark, incidentally, has a lower corporate tax rate than the U.S. does and embraces many capitalistic policies that would surely repel the average progressive Democrat.
In any event, our tax revenue can’t even support our existing entitlement programs. To create social welfare on a European scale, Democrats would need to significantly raise income taxes on the middle and working classes to broaden the base. Democrats want this utopian welfare state paid for by a sliver of the population.
Indeed, that sliver drives new investment and economic growth. Yet, another Booker plan, supported by Sen. Elizabeth Warren (D-MA), former Vice President Kamala Harris, and numerous other Democrats, is to tax “unrealized gains,” as well.
Today, an investor who sells stocks or real estate is taxed on the profits, or capital gains. High taxes on capital gains already discourage investment. But Democrats want to tax the wealthy on investments they still hold and on profits they may never realize, by employing a bunch of government agents to assess what they may make in the future.
Why? Because it’s easy and lazy to blame “corporations,” “Wall Street barons,” and the ultra-rich for your problems.
Meanwhile, red states have been flattening, cutting, or eliminating income taxes. Since 2021, 23 states have cut their top income-tax rates. At the same time, blue states are raising taxes on top earners to try to keep up with state spending and mollify the increasingly radical leftists of their base.
These policies are surely one of the reasons there has been a significant migration from places such as California, New York, and Illinois to Texas, Florida, and other fiscally conservative states that don’t have an income tax.
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It’s not merely states. In New York City, for example, rising lefty star Mayor Zohran Mamdani is proposing another tax-the-rich hike to close the budget deficit.
To be fair, the modern Democratic politician has no other idea. Their socialistic zero-sum economics policies, driven by resentment and division, rest on the notion that if wealthy people win, poor people lose. No matter how often this thinking has proven destructive, they won’t give it up.
