When grassroots activists from Canada began protesting corporate greed in New York’s Zuccotti Park last September – initiating what came to be known as the “Occupy Wall Street” movement – they couldn’t have known that they were actually kick-starting an international phenomenon which would effectively shift the way people viewed class relations. Although recently booted from Zuccotti and Wall Street itself, the protesters have come to “occupy” what seems like most of America since last fall, setting up tents in our cities, towns, universities, jails and media headlines.
Though the initial fervor created by the “Occupy” movement appears to have died down since the fall, it leaves in its legacy messy class-warfare issues that have been brewing in the U.S. for years. With election season heating up heading into the summer, liberals have picked up where “occupiers” left off by waging a new (if more subtle) “war on the rich.”
In one of their first swipes at the new Republican nominee, President Obama’s campaign targeted Bain Capital, Mitt Romney’s asset management firm. By labeling Romney and his Bain colleagues as perpetrators of “vulture capitalism,” the Obama campaign essentially condemned our capitalist system, a move that represented a shameful cold shoulder to the economic principles that have made our nation so prosperous.
In Maryland, Democratic Gov. Martin O’Malley recently took the liberal “war on the rich” to an unprecedented level by signing off on massive tax hikes for residents earning more than $100,000 ($150,000 for couples), which accounts for about 14 percent of the state’s population. O’Malley has tried this twisted progressive tax logic before – in 2007, the governor attempted to balance the state budget by raising taxes significantly on the wealthiest taxpayers. The result? Millionaires left the state in droves and took up residency in nearby Washington, D.C. or northern Virginia. State tax revenues fell far short of the anticipated amounts, leaving the state’s budget far from balanced.
Inferring this chain of events from Maryland taxpayers to a national scale provides a frightening glimpse of what could happen in America if liberals continue to follow through with their increasingly “progressive” tax agendas. Raising rates on the wealthiest Americans and targeting large corporations with steep double taxation measures is bad policy for several reasons.
Since the richest citizens and most powerful corporations tend to have the most flexibility in choosing where to live, they are able to strategically evade tax increases more so than the average person or small business. Just as Maryland’s millionaires fled higher tax rates, so too will other wealthy Americans. But instead of relocating across the border to another state, they will move overseas and take their tax revenues with them. Does anyone really think it would be that infeasible for Microsoft or Nike – two gigantic American corporations headquartered in the Pacific Northwest – to pick up roots and move operations a few hundred miles north to Canada if U.S. corporate tax rates began to seriously impact their bottom line?
Liberals’ tax increases will generate disappointing federal revenues, inevitably resulting in tax hikes for upper-middle-class Americans to cover the deficit. It seems that Democratic legislators truly don’t understand that the next logical extension to raising taxes on the wealthiest Americans is an increased tax burden for the middle class citizens whom they profess to protect.
Waging a tax war on the wealthy is economically unsound for another major reason: Since the richest citizens, by definition, have the most disposable income, they are most likely to use those extra earnings to stimulate the economy through investments and consumption. This fact provides the basis for “trickle-down economics” – the idea that if the rich aren’t unduly burdened by taxes and regulations, their free spending will raise the standard of living for society as a whole. It seems obvious that the economy is better off when Americans are spending their money as they see fit instead of sending it to Washington to get caught up in bureaucratic waste.
While President Obama and his campaign continue to allege that the budget can be balanced on the backs of the rich, the data consistently proves this is a partisan fantasy. Even if the government were to tax those who earned more than $114,000 at a 100 percent rate, it would only bring in approximately $3.4 trillion in total tax revenues, which would still leave a deficit every year in the federal budget. We have a spending problem, not a revenue problem. Liberals’ efforts to misrepresent these facts are simply a distortion of reality in the name of scoring political points; it is irresponsible politics, and voters should hold them accountable come November.
The increasing traction the left’s message of demonizing the wealthy is gaining in society makes me worry about where this nation is headed in the years to come. The advantages of upper-class life were something Americans used to aspire to have. Wealth was considered a shining and attainable example of the wonders of capitalism. Today, liberals are apparently seeking to destroy this beacon of prosperity and democracy by taxing it to death. It is bad economic policy motivated by base jealousy.
Consider a school classroom. Inevitably, there is some kind of curved grade distribution among the students. While a few receive failing grades and a few receive very high marks, the majority are somewhere in the middle, and the class average is around a ‘C’. Using the liberals’ logic, shouldn’t we just eliminate the outliers and give everyone in class a ‘C’? Don’t the high-achievers have extra GPA points they can spare to help out those who are in danger of failing?
If this were to happen, the end result is predictable. The students who had previously made higher than a ‘C’ would have no incentive to work that hard anymore; they would settle at the class average. What you would eventually get is lower overall class performance and a culture of underachievement.
Income redistribution by taxing the wealthy is logically equivalent to the classroom. It artificially distorts economic incentives, which ultimately lowers the standard of living for society as a whole. Hard work is penalized, and those who do choose to work hard are essentially subsidizing the underachievers. This is not the kind of America of which I could feel proud.
Still, the liberals push on with their tax-heavy agendas and continue to bite the proverbial hand that feeds. As Gov. O’Malley has already proven in Maryland, increasingly progressive tax structures just don’t work: They’re bad economics, bad politics and send the completely wrong message to society.
It seems that at the core, the Wall Street protesters weren’t such valiant fighters for economic equality after all. All they really wanted was to “occupy” the wallets of hard-working Americans.
Henry Downes is a sophomore majoring in economics.
