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Analysts on Left Warn Against “Soak the Rich” Taxes in Health Care Debate

2 min readBy: Joseph Bishop-Henchman

Joseph Thorndike at warns his fellow progressives that it’s a mistake to support taxes on the wealthy as the way to pay for expanded government services:

[F]inancing a mass program with a class taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. is not a good idea. It obscures the connection between taxes paid and benefits received — a connection that’s necessarily tenuous for many government programs, but not for healthcare. It also undermines the notion that taxes are the price we all pay for civilized society, not just the price that some other (rich) guy has to pay.

Asking the few to pick up the tab for the many implicitly devalues the service being provided. Worse, it devalues taxation itself, which should rest on the notion that some things – – like healthcare – – are actually worth paying for.

(Thorndike writes that Americans want a more progressive taxA progressive tax is one where the average tax burden increases with income. High-income families pay a disproportionate share of the tax burden, while low- and middle-income taxpayers shoulder a relatively small tax burden. system, but his evidence is a poll that showed two-thirds of Americans support additional services when they’re paid for by other people. I’m surprised it’s only two-thirds!

A better perspective comes from our annual poll, which asks respondents what they think the maximum percent of a person’s income should go to all taxes. The average response in 2009 was 15.6%, far lower than the 28.2% average for all Americans. Also, only 10% of Americans favored increasing services and taxes, as opposed to 34% who favored reducing taxes and services, or the 41% who favored keeping the status quo.)

In the New York Times, their political memo column lists a number of analysts who say that the Obama Administration’s ambitious vision for government can’t possibly be paid for by only taxing the rich:

[H]igher rates like those in the House health care legislation could lead to tax avoidance schemes, reducing the government’s collections and warping business decisions, analysts say.[…]

Mr. Obama’s vow to tax only the rich is a variation “of Bush’s policy that nobody has to pay for anything,” said Leonard Burman, a veteran of the Clinton administration Treasury and director of the nonpartisan Tax Policy Center.

“Democrats are more worried about the deficits,” Mr. Burman added, but “they put the burden on a tiny fraction of the population that they figure doesn’t vote for them anyway.”[…]

“This idea that everything new that government provides ought to be paid for by the top 5 percent, that’s a basically unstable way of governing,” Mr. Burman said.

In the same article, the Times also references our report calculating top marginal tax rates with the surtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services. and finding that taxpayers in 39 states would pay a top tax rate over 50%. (The Times misattributes the report to another organization.)