Tax the Rich!
It doesn't always make sense--but it does now.
John B. Judis , The New Republic Published: Tuesday, July 21, 2009
House Democrats have proposed to pay for their national health insurance by imposing a one percent surtax on the income tax bill of couples making more than $350,000--that's the top 1.2 percent of households. The surtax would rise to 5.4 percent for households making more than a million dollars. That's pretty small potatoes for the country's high-rolling class, but the proposal has encountered stiff resistance from Republicans and Blue Dog Democrats, as well as from the editorial pages of The Wall Street Journal and The Washington Post.
These critics don't make the obvious complaint--that the tax increases would target high-value political contributors who are important to congressional Republicans and to Democrats who can't depend on contributions from labor unions or liberal professionals. Instead, they focus their opposition on the economics of the proposal. The Republicans and Blue Dog Democrats, along with The Wall Street Journal, say it will hurt small business and discourage "entrepreneurial activity." The Washington Post maintains that taxing the rich to pay for the health care program would deprive Congress of a revenue source it would need in the future to reduce the deficit.
These arguments make little sense. According to a study by the Center on Budget and Policy Priorities, very few small businesses would be affected. And small businesses that offer health insurance will see their costs reduced by the health plan. And as my colleague Jonathan Chait has pointed out, The Washington Post is arguing that we shouldn't use an effective means for reducing future deficits to reduce future deficits. If you can figure out the reasoning there, you are smarter than I am.
But I want to take the argument a step further and address the Republican/Blue Dog argument that taxing the rich will--in the words of one clumsily written congressional letter--"kill the goose that will lay the golden eggs of our recovery." I think it's important to realize that during a recession, taxing the rich can speed a recovery as long as the revenue it creates is spent rather than saved. And during a recovery, taxing the rich can help stabilize the economy. It can be a good thing to do in either case.
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http://www.tnr.com/politics/story.html?id=700da4c9-ed0f-4036-a017-ce2cc0667a78