Communalists: Tax Rates Do Not Affect Behavior

My friend approves high income taxes. The other day he flatly asserted that the 91% tax rate on high income-earners during the period 1951-1963 did not retard economic growth.

He says we need 91% again. He says a top marginal tax rate of 91% would not discourage earning or investment.

My jaw dropped. I cried out, “You don’t think it would affect behavior?”

He said, “No.”

“What if it were 95% or 98%?”

He said, “It wouldn’t discourage high earners.”

My jaw became unhinged.

“Taxes are not thieving,” he said.

I asked, “At what rate are taxes usurious?”

He did not answer.

My friend is being fed by recent news reports of anti-capitalists urging that AIG executives be taxes at 90% and by extreme blogs such as Truth and Politics, which provided the historical tax rates referenced in the first link above. The AIG executives vociferously objected. A high tax rate certainly affected their behavior.

My term for capitalism’s detractors like my friend is Communalists. Some call them Liberals but they prefer the moniker Progressives. They think Communalists conjures up images of “community”. I prefer something that shows the centrally-dictated nature of their enterprise, something whose roots bears family relationship to “committee” ,”commune” and “communism”.

Communalists like my friend imagine that “the rich” are unfeeling super-consumers, Gatsby zillionaires. They can’t imagine that “the rich” are sometimes temporarily enjoying a few good years and that “the rich” may be the family down the street that owns a small business and drives older cars.

Communalists imagine that if government took 90-98% of rich people’s profit, that government could offer unlimited health care and education and end homelessness. The truth is that the tax revenue would not make a dent in those needs. They would be as a grain in a bushel basket.

Communalists imagine that hard-working high earners would continue working their 70 hour weeks and risking their life savings to buy machines and inventory and to train their workers in spite of confiscatory tax rates. Communalists are wrong.

Most people would not struggle to attain higher degrees, such as my friend holds, at great cost, if there was not some potential for higher earnings. People would not mortgage their house to start a software company, would not work 70 hour weeks if 91 cents of every dollar earned between hour 40 and hour 70 were plundered by the communalist’s agents in the government.

Everyday observations confirm my position. (These elude my friend.) The man who bought my business would not have had he been faced with a 91% tax rate. He would not have been able to amass any money to buy it in the first place if he had been forced to pay high taxes in the years preceding my sale to him. My friend’s belief contradicts economic literature by the ton. He is doing “The Ostrich”, the dance of the Communalists.

For some people, it’s been all downhill since the fall of the Berlin Wall and the demise of the Soviet Union. The days of glory were those under Stalin, Fidel, Kim of Korea and Mao. They want to put us all “on the reservation”. Their way to do that is to penalize risk-taking, effort and study through high tax rates. They say “Bring back the 91% tax rate.”

This is an astonishing view into the abscesses of the liberal mind.

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One Response

  1. If 90% of the money is taxed for high earners, everyone will become lazy and no one will ever try to be a millionair. Also, people will start dealing in cash and save that money for evading taxes…

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