To help the jobless, cut taxes. Even on the rich.

Ending the misery of a high unemployment rate is about facts. And the facts are stark. From the standpoint of a business owner or manager, there is a lot of bad news, both current and on the way. First, the stimulus bill – although hugely expensive – did not helped alleviate high nationwide unemployment.

Another fact to consider if you are a business person is ObamaCare. It was passed – like the stimulus bill – with the noblest of intentions. But nobody can escape the fact that it increases the costs of new employees, the cost of complying with its complex regulations, and the costs of its mandates. Similarly, Vermont’s rush toward single-payer brings with it a HUGE amount of uncertainty, in particular how much the new system will cost, and whether anyone has the political will to initiate all the cost-savings measures that will be required to make it work.

These facts are bad enough, but from the standpoint of someone who must make business decisions, the worst part is not knowing how much it will affect their operations, because of all the conflicting information about what will or won’t be required by the regulations.

And finally, many of the people who own and/or run successful businesses must contend with the fact that they are being targeted for increased taxes to pay for the increased spending plans of the federal and state governments.

After the profligate spending started by George W. Bush and accelerated under President Obama, the public’s increasing calls for fiscal responsibility are being heard by our elected officials. Unfortunately for us, many of their preferred solutions, especially in Vermont, involve raising taxes instead of cutting their spending.

This is exactly the wrong way to go if their objective is to get people back to work. There can be debate about whether taxing “the rich” more is the best way to address our government’s appalling deficits and spur the economy, but it should be a pretty short debate, and those who favor raising taxes should lose. Let’s look at a few cases at the national level:

Exhibit A: When President Calvin Coolidge dramatically reduced income taxes in the mid-1920s, tax revenues to the federal government nearly doubled as the economy jumped to life, and the share of taxes being paid by the richest people in the country went from 45% to 62%.

Exhibit B: When President John F. Kennedy successfully pushed for income tax cuts, the results were much the same. Americans earning over $50,000 a year (equivalent to over $200,000 a year in today’s dollars) paid more taxes after the cut than before, and those making over $1 million a year nearly doubled their tax payments after the rate was cut.

Exhibit C: Under Presidents Johnson, Nixon, Ford and Carter, tax rates (and federal spending) were raised time and time again, beginning with President Johnson’s “Great Society” welfare programs. The 1970s were a horrendous mess of high unemployment, a stagnating economy, and high inflation. Not all of these problems were caused by raising taxes, but Exhibit D certainly indicates what the cure was.

Exhibit D: Under President Ronald Reagan, taxes were lowered significantly, regulations on businesses were reduced, and the economy took off, yielding a 24% increase in real federal revenues during his time in office.

Exhibit E: Remember George H. W. Bush’s promise? “Read my lips: No new taxes,” he assured us. Then he broke the promise and raised taxes under pressure to balance the budget. Predictably, this led to less federal revenues, and even more important, the rich actually paid less taxes after the rate hike.

So the historic pattern is obvious: lowering tax rates – primarily income taxes, dividend and capital gains taxes – spurs the economy to grow, and nets more tax revenue from the richest Americans.

But growth is meaningless if it doesn’t help those who need it most. So although reducing tax rates can mean more revenue to the government, does it help the poor? Yes, it does. Let’s take the 1980s – the “decade of greed,” as it’s called by some liberals – for example. After seeing their real income decline by five percent during the 1970s, the poorest 20 percent of Americans experienced a six percent gain in income during the 1980s. Also, the number of people making less than $10,000 a year declined by five percent during that period.

At the same time, the middle class saw even bigger gains. There was a 60% increase in the number of workers making more than $50,000 a year, and an 83% increase in the number of people making more than $75,000 a year. Clearly, those at the upper end of the income spectrum saw faster gains under the Reagan tax cuts, but this was a rising tide that raised almost everyone’s boats, including those at the lower end of the income ladder.

Tax cuts work as an economic stimulus, and they work across the income spectrum. So why the reluctance to use them again, if they have worked in the past, especially if they result in the rich paying an even greater portion of the taxes in this country? Based on the e-mail updates I get from Sen. Bernie Sanders, getting more money out of the rich is one of his primary objectives, so why would liberals/progressives oppose tax cuts if that would achieve it?

I can’t answer that definitively, because I simply don’t understand it. Perhaps a progressive reader of The Screed will fill in that blank. One recurring theme seems to be that Bernie and others simply cannot stomach the idea of people with money making even more money, even if that means they are creating jobs, investing in the economy, expanding their businesses, and spending freely, thereby helping everyone else.

If that’s the case – if, in other words, it’s a matter of fundamental “fairness” – then that strikes me as deplorable. What that would mean, then, is that some people are willing to see the jobless remain jobless, to see the economy continue to founder, just so that they can be sure rich people aren’t getting richer. Is that a reasonable trade-off?

So let’s think about the situation here in Vermont. Many liberals and progressives consistently and forcefully advocate that the “rich” in Vermont should pay more taxes than they do now, because it would be “fair.” Many of them increased the vehemence of their calls for taxing the rich after the Bush tax cuts were extended, saying the continuation of those cuts amount to a $190 million “gift” to the rich of Vermont.

I’ll leave aside a discussion of why not taking more of somebody’s earned money isn’t actually a gift, and move instead to a common-sense assessment: It’s obvious that the Vermont legislature thinks “the rich” can afford it, but keep in mind that people tend to have expenditures that match their incomes, so a more important consideration is whether “the rich” think higher taxes are reasonable. If Montpelier decides “the rich” can afford more taxes, “the rich” may just decide there are some things they can’t afford, like expanding their businesses, hiring more workers, spending cash, or even coming to Vermont in the first place.

This is especially troubling when you consider that the top five percent of income earners in this country are responsible for about a third of consumer outlays. Do we really want these people to quit spending? How many more jobs will be lost – or not created – if we do this? Does anyone really expect prosperity to ramp up if they place more taxes on those who drive it? I’m not naive enough to think the folks in Montpelier are stupid. However, all evidence points to the conclusion that they think the rest of us are.

If helping those in need of jobs is our objective, taxing the rich is no solution. It’s a trade-off that will yield, at best, short-turn revenue increases that will pale in comparison to the losses they will cause.

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About Jamal Kheiry

Public relations consultant with experience in domestic and international journalism and public relations. At it since 1995.
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