DV Journal

For an alternative viewpoint, see ‘The Rich Need to Pay More taxes”

Heading into Tax Day, if you listen to progressive policymakers for a few minutes, you’ll likely hear that few problems on Earth can’t be solved by “taxing the rich.” Want to nationalize healthcare? Tax the rich. Want to close the deficit? Tax the rich. Need a ball gown for the Met Gala?  Tax the rich. Unfortunately, legislators not invited to fashion shows should look elsewhere for real solutions to America’s fiscal challenges.

Let’s start with the basics: the federal tax code is already one of the most progressive in the world. According to the Joint Committee on Taxation, the U.S. tax code is highly progressive, with the bottom 50 percent of U.S. taxpayers facing an average federal tax rate of 6.8 percent. In comparison, the top 1 percent pays about 5 times that amount, at 34 percent. Note that these measures include all federal taxes, including payroll taxes, which are generally regressive, and the corporate tax, which JCT assumes primarily falls on higher-income earners.

Compared to our peers, the U.S. tax code has generally been more progressive than any other in the developed world. While many European nations raise more revenue overall, they do it by taxing everyone — including low-income households — at the register through value-added taxes. In contrast, the U.S. leans heavily on progressive income and payroll taxes, disproportionately hitting high earners.

It’s also progressive relative to income. According to the IRS, the top 1 percent earn 22 percent of total income but pay more than 40 percent of the nation’s income taxes. By contrast, the bottom 50 percent of earners collectively pay a negative share of income taxes, mainly due to refundable credits like the Earned Income Tax Credit and the Child Tax Credit. Note that these households do face other taxes, and these outcomes are by design.

The basic facts of the U.S. tax system reveal that those arguing in favor of a progressive tax system have already won — that’s what the United States has today.

What the United States does not have is a massive welfare state to match those of many European nations to which so many U.S. progressives aspire. The overall level of U.S. taxation is comparatively low. For instance, in France, the government collects 43 cents from every dollar earned, compared to about 25 cents in the United States.

U.S. progressives tend to hide the ball on this front. When Sen. Bernie Sanders released his Medicare for All financing plan, it came with a buffet of new taxes: a 52 percent top income tax rate, a new wealth tax, higher corporate taxes and more. Yet, even with all that, it still came up trillions short. That was to fund one new program.

When it comes to fixing the structural deficit, the math gets worse. Manhattan Institute economist Jessica Riedl estimates that taxing the rich to the “maximum sustainable extent” — raising top income tax rates, taxing capital gains as ordinary income, implementing a wealth tax, closing loopholes — would increase, at most, 1 percent to 2 percent of GDP.

Yet, the Congressional Budget Office projects deficits will average 6 percent of GDP in the 2030s and climb toward 9 percent by 2054. Under more realistic assumptions, the deficit is likely to be 14 percent over the long term. The gap between what progressive taxes can raise and what the government is projected to spend isn’t just large — it’s unbridgeable.

The problem isn’t tax revenue. It’s spending. Historically, federal revenues have averaged about 17 percent of GDP. Even without new laws, they’re projected to rise to nearly 19 percent. But spending is on track to hit, conservatively, 27 percent of GDP by 2054. And it’s not because of military or discretionary spending. The drivers are Social Security, Medicare and interest on the national debt.

There is no path to long-term fiscal solvency that does not run through spending reform. The numbers are too large, the obligations too dominant, and the demographics too unfavorable to pretend otherwise.

Taxing the rich may be a helpful applause line. But on this Tax Day, remember that as a governing strategy, it doesn’t come close to solving the problem. Eventually, lawmakers must say the quiet part out loud: the federal government doesn’t have a revenue problem. It has a spending problem — and the longer we ignore it, the harder it will be to fix.

Certain chores in life aren’t fun, but they are necessary. Such as preparing your last will. People often put it off as long as possible, dreading the day when the Man In the Bright Nightshirt (as W.C. Fields called death; more on him in a minute) comes calling.

A will serves another purpose. It can provide valuable insights into historical figures. How they distributed their personal effects often reveals what was going on in the head and heart.

So, let us consider the quirky, eccentric and downright weird tidbits tucked away in the farewell documents of several famous folks.

You learned it as a child: “Listen, my children, and you shall hear of the midnight ride of Paul Revere.” Paul was a true patriot, and a darn good silversmith and engraver, too. Which made him prosperous in Revolutionary Boston.

However, Paul had a beef with a certain relative. He left most of his children and grandkids $500 each — a nice chunk of change in 1818. One grandson got only $1.

Imagine the family discussion after that will was read! Historians aren’t certain why that particular grandson fell out of favor.

Poor Eli Whitney. All he wanted to do was invent a machine to make farm work a little easier. And he did, too. His cotton gin also made the mass production of cotton possible, which greatly increased the demand for slave labor, which in turn fueled the split that led to the Civil War.

When he died in 1825, his will said two nephews each got $1,000. Mrs. Whitney was given all their household furniture, plus “my Horse, Chaise & Sleigh.” No word on how the Widow Whitney felt about that.

Speaking of the Late Unpleasantness (a Southern euphemism for the Civil War), Harriet Beecher Stowe’s novel “Uncle Tom’s Cabin” got folks on both sides riled up. So much so that when President Lincoln met her, he remarked, “So you’re the little woman who wrote the book that caused this great big war.”

When she passed away in 1896 at age 85, she left her son a stack of valuable railroad stocks; and she threw in a Florida orange grove for good measure.

Daniel Webster was a flinty Granite Stater who served as senator and secretary of state and who bested Satan in “The Devil and Daniel Webster.” But he couldn’t best death.

When his time ran out in 1852, his will disposed of every last belonging, including his fishing tackle and a gold snuffbox decorated with George Washington’s likeness. A lucky grandson got those goodies. (And what boy wouldn’t want a gold snuffbox?)

J.P. Morgan was a no-nonsense business tycoon who was the richest man in America in his day. We’re talking Sam Walton, Warren Buffett, Bill Gates wealth here. During the Panic of 1907, he personally intervened, keeping the United States government from declaring bankruptcy. That’s how rich he was.

When he died six years later, his handwritten will left “One Million Dollars” (his capital letters) in a trust for his wife. That would be nearly $32 million today. The Widow Morgan did not go without.

We mentioned W.C. Fields earlier. The comic genius was also a troubled soul. He was deeply paranoid, often imagining that people were out to get him. As a result, he repeatedly changed his will on a whim.

One version included endowing a “W. C. Fields Home for Orphan Colored Boys and Girls, Where No Religion of Any Sort is to Be Preached.” When he got into an argument later with a Black domestic servant he felt was stealing from him, he had his attorney revise the document to the “W.C. Fields Home for White Orphan Boys and Girls …”

That provision was in the final will when the end came on Christmas Day, 1946, a holiday he claimed to hate. (Fields’ estranged wife and son used that clause to legally challenge the document, too.)

Finally, history offers an object lesson for us to ponder. This last example doesn’t include any unusual bequeaths because — get this — Abraham Lincoln died without a will. And remember what he did for a living before he moved into the White House? He was a lawyer. That’s right: the man famous for writing the Gettysburg Address forgot to write a will for himself, proving the old saying, “Cobbler’s children need shoes.”

That omission caused tremendous problems for his widow, the emotionally disturbed Mary Todd Lincoln. The probate court named Supreme Court Justice David Davis, a longtime Lincoln political supporter, the administrator of Lincoln’s estate. Davis may have been good friends with Abe, but he had a testy relationship with Mary. Settling the estate was a long, bitter, costly affair.

So, do your loved ones a huge favor. If you don’t have a will, have one prepared. They’ll be happy to know that gold snuffbox will be staying in the family after all.

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