By Kevin D. Williamson
Tuesday, September 08, 2020
Funny thing about American politics: In campaigns, we
fight the culture war, but in government, we fight about nickels and dimes. It
is a political truism that most people really don’t give the furry crack of a
rat’s patootie about whether the top federal income-tax rate is 37 percent or
39.2 percent. What people really get excited about is abortion or gun-control
or transgender toilet etiquette and other issues that thrive weedily in
cultural fissures.
There is a good reason most people do not get that
excited about the top federal income-tax rate. A large proportion of Americans
— just under half, in fact — pay no federal income tax at all. Unlike those
expansive Nordic welfare states that our friends on the left claim to admire so
intensely, the U.S. system of federal tax rates is radically progressive,
relieving much of the middle class and practically all of the lower-income
classes of all or practically all of the federal income-tax burden. And the
number of Americans who have to worry about the top rate is even smaller: For a
married couple, the top rate kicks in north of $600,000 a year, a sum earned by
only about 8 percent of U.S. households. Add an extra $100,000 or so, and you
are down to 1 percent.
But minority groups, even very small minority groups, can
have an outsized influence on politics, especially if they are wealthy minority
groups. Bitch and moan about inequality all you like, the disproportionate
influence of the wealthy on political policy is generally a good thing, because
the wealthy are (slightly) less authoritarian than the poor. As the economist
Bryan Caplan (“Why Is Democracy Tolerable?”) wrote in 2012:
Before I studied public opinion, I
often wondered, “Why are democracies’ policies so bad?” After I studied public
opinion, I started asking myself the opposite question: “Why aren’t
democracies’ policies even worse?” The median American is no Nazi, but he is a
moderate national socialist — statist to the core on both economic and social
policy. Given public opinion, the policies of First World democracies are
surprisingly libertarian.
Compared to the wealthy, Professor Caplan finds, the poor
are “much more anti-gay. They’re much less opposed to restricting free speech
to fight terrorism.” Professor Caplan finds that while there are not very many
points of radical divergence in opinion between the affluent and the
non-affluent, in those instances where there is a marked disagreement, the
affluent are more likely to prevail.
Which is why Nancy Pelosi and Chuck Schumer are getting
ready to go to bat for tax cuts for the rich, their No. 1 domestic priority in
the post-Trump/post-McConnell future they believe will be arriving in January.
Green New Deal? Free false teeth for impoverished grandmas? Oh, pipe down,
peons! Bob Weinstein has bills to pay!
In a very amusing New
York Times column by two
Brookings nerds, Richard V. Reeves and Christopher Pulliam, the question is
raised:
The election is a referendum not
only on the moral failings of President Trump, Democrats argue, but on the
economic fissures of the new economy. It is a fight, Mr. Biden says, on behalf
of “the young people who have known only an America of rising inequity and
shrinking opportunity.”
Why on earth, then, are Democrats
fighting — and fighting hard — for a $137 billion tax cut for the richest
Americans? Mr. Biden, Nancy Pelosi and Charles Schumer don’t agree on
everything, but on this specific issue they speak with one voice: the $10,000
cap on deductions for state and local tax (better known as the SALT deduction)
must go.
Limiting the deductibility of state and local taxes
(SALT) amounted to a big tax increase on rich progressives in high-tax
jurisdictions such as New York City and San Francisco, the political homes of
Senator Schumer and Speaker Pelosi, respectively. For years, this provided the
limousine-liberal set with a much-needed economic palliative against the pain
of living under the rapacious and incompetent governments of New York,
California, New Jersey, Connecticut, etc. It was a
have-your-cake-and-eat-it-too arrangement: The grubby little miscreants in
Sacramento and Albany were happy with the jack, and the high-income
constituents they milk like a particularly docile if snappily dressed herd of
dairy cattle hardly felt any pain thanks to the federal tax analgesic.
With the SALT deduction severely limited, a lot of rich
Democrats took a hit. Some of them even packed up and left for more
plutocrat-friendly jurisdictions such as Florida, dumping assets in the
high-tax states: Bob Weinstein sold his Greenwich home, taking a 15 percent
haircut off the asking price, dumped his Upper West Side townhouse at no
profit, and sold his magnificent spread stretching across the 16th and 17th
floors at the Beresford. The Weinstein family has had problems bigger than
taxes in recent years, but they aren’t the only ones reducing their footprints
or entirely getting out of New York City and New York State, out of
Connecticut, out of New Jersey, and out of California.
This has been felt especially keenly in New York, which,
thanks to its own radically progressive tax code, relies on a tiny fraction of
its taxpayers to fund a large share of state and local government. As of 2016,
taxpayers earning more than $700,000 a year — the cutoff point for the hated 1
percent — were paying 43 percent of New York City income taxes and the majority
of New York State income taxes, according
to state data analyzed by the Empire Center. And some of those whales left
for Florida, Texas, Nevada, etc. Governor Andrew Cuomo warned that the lost
revenue from millionaire tax refugees might force cuts in state spending or —
angels and ministers of grace defend us! — higher taxes on the middle class.
But, as the Wall Street Journal put it, Governor Cuomo, like his
progressive colleagues around the country, did nothing to reform New York’s own
tax policies. Instead, he simply raged that the federal government’s unusually
intelligent decision to cease subsidizing these policies was “diabolical.” From
the Journal’s editorial board:
During his 2010 campaign, Mr. Cuomo
promised to let New York’s tax surcharge on millionaires expire. But he has
extended it again and again and now wants to renew it through 2024 because he
says the state needs the money. Meantime, he warns that a wealth exodus could
force spending cuts for education and higher taxes on middle-income earners.
All of this was inevitable, as we
and others warned. Yet rather than propose to make the state’s tax burden more
competitive, Mr. Cuomo rages against a tax reform that has helped the overall
U.S. economy, even in New York. Perhaps now that he’s found Art Laffer on the
road to Albany, he’ll think anew.
Properly understood, Schumer and Pelosi are not
responding to the demands of a tiny minority of high-income taxpayers — they
are responding to the demands of an even tinier minority of Democratic
governors and mayors: Governor Cuomo, Mayor Bill de Blasio, Gavin Newsom in
California, Mayor Eric Garcetti in Los Angeles, etc., along with federal
officeholders such as Senator
Kamala Harris, who depend upon those great overflowing slop buckets of
campaign cash coming out of Hollywood, Silicon Valley, and Wall Street.
Sometimes, a small minority deserves to prevail.
Sometimes, it’s just a bunch of champagne socialists trying to sneak out of
happy hour without paying their tabs.
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