Educating AOC: Why Raising Taxes on the Rich Hurts Unwealthy Americans the Most

By Paul Dowling

“You know, you look at our tax rates back in the ’60s and when you have a progressive tax rate system, your tax rate, you know, let’s say, from zero to $75,000 may be ten percent or 15 percent, et cetera.  But once you get to, like, the tippy tops, on your 10 millionth dollar, sometimes you see tax rates as high as 60 or 70 percent.  That doesn’t mean all 10 million dollars are taxed at an extremely high rate, but it means that as you climb up this ladder you should be contributing more.”  —Alexandria Ocasio-Cortez, arguing for the socialist confiscation of more wealth, in order to empower government control and to disempower individual choice as the model for how the nation’s economic decisions should be made

“You make $10 billion, you pay a billion.  You make $10, you pay one [dollar].  [Of] course, I would get rid of all the deductions and all of the loopholes, but here’s the key, people: they look at a guy who put in a billion dollars, he’s got $9 billion left, [so they cry out,] ‘that’s not fair, we need to take more of his money.’  That’s called socialism.  And what made America . . .  a great nation was we had a very different attitude. We would say, ‘he just put in a billion dollars; let’s create an environment that’s even better for him, so that next year he can make $20 billion and put in $2 billion.’  That’s how we went from nowhere to the pinnacle of the world in record time.  And it’s growth, it’s not taking what’s there and dividing it up and making it smaller.”  —Dr. Ben Carson, teaching true economic fairness, instead of teaching people to covet what others have earned and falsely referring to that as fairness

“You shall not do injustice in judgment; you shall not be partial to the poor, nor show favor to the mighty; but you shall judge your neighbor fairly.”  —Leviticus 19:15, instructing that true justice requires that all human beings enjoy equal protection under the law, in contradiction to the agenda of progressive socialists who call unequal protection under the law ‘social justice’

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Alexandria Ocasio-Cortez majored in international relations and economics at Boston University, graduating cum laude in 2011.  So, one would think that AOC ought to possess a better understanding of economics than she demonstrates whenever she opens her mouth on the subject. Presidents Kennedy and Reagan, who shared similar educational backgrounds with AOC—from the days before American universities were infiltrated by Leftists indoctrinating students into socialism, rather than liberty—understood that cutting taxes on the wealthy helped the poor and middle-income earners even more than it helped the rich.  (Kennedy graduated cum laude from Harvard with a degree in government and international affairs; Reagan received a degree from Eureka College in economics and sociology.)  This is something that AOC fails to understand, or else she believes, like most of her Marxist fellow travelers, that the correct use of tax burdens is to make people less financially free and more dependent upon the state.

In a presidential primary debate, back in 2008, Barack Hussein Obama was debating Hillary Rodham Clinton.  The moderator pointed out that Bill Clinton had dropped the capital gains tax from 28% down to 20%, and that George W. Bush had subsequently dropped the tax down to 15%.  Due to the increased economic activity that resulted, “[i]n each instance, revenues from the tax increased.  The government took in more money. . . .  So, why raise it at all?”  BHO replied that he wanted a tax increase “for purposes of fairness.”  He went on to explain that “[p]art of what has happened is that those who have been able to work the stock market, and amass huge fortunes on capital gains, are paying a lower tax rate than their secretaries.  That’s not fair!”  So, even if the lowering of a tax helped the government to more easily afford paying out entitlements to a greater number of poor people, Obama was against the increased revenue collections!  Obama’s socialist politics of taking punitive measures against high earners—even if this hurt all people, rich and poor, and harmed the country to boot—was more important than doing what helped America.  (And Obama lied about the secretaries.  The truth is that any secretaries who sell stock are taxed exactly the same as all others who do.  Also, the rich people who hire secretaries are generally taxed at a higher rate on income than their secretaries are.)

It Is the People Who Cannot Afford for Billionaires to Pay More

If the government raises taxes on billionaires, then those billionaires will simply write a bigger check to the government and move on.  They do not spend most of their money to live on, anyway, since they already had more than enough money for themselves long before they became billionaires.  The truth is that most of a billionaire’s money is used by the bank to lend out to businesses or to purchase stocks and bonds; some of it is used to lend to bank customers for car purchases, home mortgages, or even student loans.

So, when a billionaire writes out a larger tax check, what that means in real-world terms is that the bank now has less money to lend out to its customers.  As a result, the bank will now make fewer loans to help new businesses get off the ground; fewer loans to help older businesses expand or make it through a hard time; fewer loans to help young families purchase their first homes; fewer loans for students to pay college expenses; and so it goes. . . .  The billionaire is left unhurt by his higher tax bill.  (This is why Americans have heard so many wealthy people tout the need for higher taxes, reflecting the truth that they just do not feel higher tax burdens the same way poor and middle-class bank customers do; such remarks also indicate just how uneducated so many rich people are with respect to economics.)  The victims of the billionaire’s higher tax burden are only the poor and middle-class people who will now find loans harder to come by and, with money now in shorter supply, more expensive to boot (since the interest rates will be affected, in accordance with the Four Laws of Supply and Demand, reflecting the reality that, if the demand for money remains unchanged but there is less money to be had, a shortage occurs, leading to higher interest rates).

A Practical Example, Using Simple Numbers

So, let us take the example of Billionaire Bill.  To keep it simple, what if Bill made a grand total of $1,010,000,000.00 (one billion, ten million dollars) in 2018?  On Bill’s first $10 million, he would be taxed at 37%, meaning that he must write a check for $3.7 million to the government, for use by the coercive sector of the economy.  Bill will keep $6.3 million of that money in the bank.  But, if AOC were to have her way, Bill’s next billion would be taxed at almost double that amount; so, instead of paying $370 million dollars in taxes, leaving $630 million dollars in the bank, Bill will instead pay $700 million dollars in taxes, leaving only $300 million behind for the private sector to use.  Some quick mental math will demonstrate that this makes for a difference of $330 million!  The bank will now have $330 million fewer dollars to lend to small businesses to create jobs, to young families to buy homes, or to private charities to help the homeless.  This $330 million would purchase 1,650 family homes worth $200,000 apiece!  And what of the super-billionaires, like Warren Buffet, Bill Gates, and others whose earnings far outstrip our fictionalized Bill?  In the end, the number of homes that will go unsold might reach into the tens or hundreds of thousands, all because of a tax hike that is meant to transfer wealth from the private economy to the coercive economy.

But is it not true that the government can spend that money to create jobs or buy homes, just as well as the private sector can?  Actually, truth be told, government bureaucrats will have to be paid to spend this money, which means that, on top of every $200,000 price tag for a home will be added the cost of the bureaucrat who must be employed to make the purchase and oversee the process of putting the home into the hands of a person who qualifies to own the government-provided home, according to bureau guidelines.  The office of the bureaucrat will have overhead related to rent or mortgage on the office space, as well as electricity and water and maintenance costs; and the process will be slow and complex, in order to ensure that the bureaucrats have a specialized task to perform that no one else can do, thus ensuring the government workers have job security.  All of this makes the homes cost significantly more than the $200,000 they would have cost in the private economy. (Government always raises costs, never lowers them, generally wasting money by paying bureaucrats to do what others can, more often than not, do for themselves more cheaply and easily.)  Transferring money to the coercive economy has never, in reality, been about lowering costs or enhancing market efficiencies (indeed, only the opposite ever occurs with government); what it has always been about has been controlling people, putting the government into a position of increasing power, so that it might more easily dominate people’s lives and force people into dependence upon the decisions of their leaders.

During the Great Recession, Forcing More Money into the Coercive Economy Backfired

During the Great Recession, President Barack Hussein Obama’s idea about how to add jobs to the economy was to have the government confiscate the money from the private sector and then use that money to create jobs where they were needed.  But, as Peter Roff has pointed out, “To put it kindly, the stimulus package that President Barack Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi rushed through Congress at the beginning of his presidency has been a flop.  It is not just that the $789 billion package has not had the effect the White House promised it would; it’s that it may actually have been counterproductive, actually lengthening the recession by effectively taking money out of the private economy, where it could have been used to create jobs and for investment purposes.  Instead it has been parceled out by the government, which has been unable to track where it has gone or what impact it has really had on job creation.  And that has led to any number of fallacious statements by senior administration officials about jobs ‘created or saved.’”  Roff continues to say, later in his commentary, that “[a]ll told, the nation has lost 2.6 million jobs since the ‘shovel ready’ stimulus dollars started to flow, rather than create the promised 3.5 million, putting the Obama administration 6.1 million jobs in the hole.  That’s a lot of jobs to make up in twelve months, and at a pace that would outstrip even the Reagan Recovery, which ultimately created 20 million new jobs by the end of his eight-year presidency.  It is now abundantly clear, even as rumors of a third stimulus package continue to circulate, that a new approach to job creation is needed.”

The lesson learned here is that the government is ill-equipped to create prosperity and often ends up doing just the opposite—destroying prosperity.  Indeed, Obama could have pushed the economy towards a much more speedy recovery by cutting—rather than raising—taxes. This is the approach that worked under John Kennedy and Ronald Reagan, and this is the same approach which has helped the economy under President Donald Trump.  Since the government does not know the situation on the ground for each and every business or family, placing the money directly into the people’s hands, for them to decide where it might be best applied, works faster and with more efficiency and effectiveness than any government committee could ever imagine working, because the people know more collectively than central planners could ever hope to know.

Taxation Is, in the End, About Whether the Private or Public Sector Should Run the Economy

So, in the end, giving control to the government and expanding the coercive sector of the economy only ended up disempowering the private sector from being able to help poor and middle-income people as only the private sector can do.  Yet this is what socialism does, time and again.  Socialism expands the size of the coercive sector of the economy to point where, ultimately, the private sector disappears and, with it, the existence of private income, private property, and individual rights altogether.  (Indeed, all rights are, in some form, property rights.)  And, in the end, socialism costs the people everything, rather than giving them anything, hurting the very people it claims to want to help in the first place and helping only those who crave total power over other people’s lives.

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