Conservative Advocate: Tax cuts for the so-called rich
The loudest objection voiced by Democrats to President Bush’s tax cut proposals is that they will benefit mostly “the rich.” Depending on whom you call “rich,” this is technically true, since the top 5 percent of all taxpayers paid 56.5 percent of all income taxes in 2000 and the top half of taxpayers paid more than 96 percent. If taxes are going to be cut in any serious way, these are the taxpayers that will benefit most. You certainly wouldn’t get much stimulus by slashing only the taxes of that half of taxpayers who pay the other 3.9 percent.
Democrats never define whom they mean by “rich,” because their purpose is simply to stir up envy of some Americans on the part of others. If you earn only $30,000 a year and think somebody earning $75,000 is rich, be the Democrats’ guest and vote accordingly. If this whole Democratic argument simply insults your intelligence, that’s OK with them — they don’t have a very high opinion of your intelligence anyway.
But let’s study the argument a little more closely. Why would Bush call for a tax cut, if its only result is to benefit people who are already rich? The best the Democrats and the liberals in the media can do is suggest that Bush is a close friend of many rich people (he comes from Texas, after all), and just enjoys showering more cash on his pals.
Yet, does anybody seriously think that someone elected to the presidency is likely to have no higher ambition than further enriching his already-wealthy friends? Isn’t it far likelier that he sincerely believes cutting taxes for everyone, including the wealthy, will have a powerful, stimulative effect on the economy?
I have been an active Republican and conservative for more than half a century, and in that time have argued tirelessly for lower taxes. But I can honestly say that it never crossed my mind to do so as a favor to “the rich.” I knew, of course, that they would benefit, but my purpose was always to encourage the economy. The rich, I figured, could and would take care of themselves.
One Democratic argument for a reduction in the payroll tax (which, unlike the income tax, falls hardest on the relatively poor) is that “They will spend the money immediately” — whereas the rich, by implication, won’t spend the money saved by income tax reduction.
There may indeed be a case for a reduction (or — another proposal — a “holiday”) in the payroll tax, and it is probably true that those who get one are likely to spend the money, and hence stimulate the economy. But what will “the rich” do with money saved on income taxes?
Will they simply stuff it in a mattress? Hardly. At a minimum, they will deposit it in a bank. And what will the bank do with it? They will do what banks do: make commercial loans, issue mortgages and put the money into circulation earning more money — in other words, stimulating the economy.
If the rich man buys bonds, rather than leaving the money in the bank, the money represented by those bonds will likewise be used (by the government or corporation that issued them) to earn more money, through investment in new projects that will likewise stimulate the economy.
In short, there is practically nothing “the rich” can do with the money they save on tax cuts except use it in some way that will stimulate the economy. And that is true even if they simply spend it.
Hate the rich if you want to, but make their money work for us — not for Uncle Sam.
(William Rusher is a Distinguished Fellow of the Claremont Institute for the Study of Statesmanship and Political Philosophy.)