2011-09-23 / On Second Thought

Soaking the rich dries up the middle class

By Sen. Jim DeMint

No matter the issue – the debt, unemployment, or America’s credit downgrade – President Obama’s solution is always the same: Raise taxes on “the rich.”

Obama is now seeking $1.5 trillion in new tax hikes on “the rich,” believing he can defy economic laws by magically increasing taxes on job creators while not hurting job seekers.

To the liberal mind, “the rich” are like parasites, arbitrarily enjoying more than they deserve, an inequality responsible for the nation’s looming fiscal crisis.

In his recent speech to Congress, the president claimed that if we “raise taxes on those who are most fortunate” to make them “pay their fair share,” it would “help the economy grow” and get “our fiscal house in order.”

These caricatures are at the center of a classwarfare argument used to blame successful Americans for Washington’s failures. But, taxpayers – rich or poor – did not create our debt crisis, big-spending politicians did.

And what’s worse, if the president and his party are successful, the consequences for the middle class will be truly dire.

Here are the facts.

Americans who make $200,000 or more a year make up about 3 percent of the country. Those 3 percent earn roughly 30 percent of our national income and pay 52 percent of all income taxes.

Raising taxes on these top brackets would mean that nearly 40 percent of all new tax revenue would be taken from hundreds of thousands of small businesses. About half of the top 3 percent, around 750,000 Americans, report business income on their personal returns.

The president talks about Warren Buffett, but his planned tax hikes would hit Mom & Pop businesses that employ your friends and family.

It boils down to simple economics. If we want the millions of jobs that small businesses create, then we cannot confiscate an even greater share of the incomes that generate those jobs.

When politicians talk about “the rich,” they want to conjure an image in your mind of an idle, entitled elite somehow exploiting the rest of us. ( That actually sounds more like the U.S. Senate.)

But the real picture is more like that of a man or woman who owns a small, local business, who started with little but has done well, and who now has a handful of employees with decent incomes and health insurance.

The fiction behind the “tax the rich” ideology is that these folks have extra money just lying around, and the government can take a big chunk of it without harming anyone.

What the liberals fail to recognize is that the money isn’t just lying around, stuffed in a mattress. It’s out in the world, growing the economy. Rich people, like everyone else, put their money to productive use.

The top 5 percent of American earners account for 37 percent of all consumer spending, about as much as the bottom 80 percent put together.

The top 10 percent of families hold 64 percent of all major investment assets. Those making over $200,000 give 36 percent of all charitable contributions.

This is the heart of the liberals’ misunderstanding. Raising taxes on America’s job creators who spend, invest and donate will punish the middle class, not the rich. It will hurt the local businesses they patronize, the companies they invest in, and the charities they support.

Money that used to create jobs, wealth, and opportunity will instead be sucked into the economic black hole of the federal bureaucracy, never to return.

The Bureau of Labor Statistics estimates that it costs businesses about $63,000 to create one job. Put another way, every $63,000 in new taxes risks an American job. And every $100 billion in tax increases – on the rich or anyone else – could threaten nearly 1.6 million jobs.

Now, who do you think loses those jobs? Will it be “the rich,” or will it be the clerk at their grocery store, the mechanic at their gas station, and the receptionist at their dentist’s office?

Make no mistake: When the taxman aims at “the rich,” he ends up hitting everyone else instead.

And the tragedy of it all is that the promised tax revenue never shows up. Over the last 70 years, the top tax rate has fluctuated wildly from a high of 90 percent to a low of 28 percent, yet revenues always averaged out to about 18 percent of the national income.

And America already has the world’s most progressive tax system. Our top 10 percent of households pay 45 percent of all taxes, a higher burden on top earners than any other industrialized nation.

It’s not higher taxes on the rich that bring the government higher sustained revenues; it’s a growing economy. What we need are new jobs, new businesses, and new investment opportunities, the very things people create when they’re free to keep and spend their own money.

The question is: Who do we trust to spend the billions of dollars it will take to get our economy moving again? The people who create our jobs, or the people who created our national debt?

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