New Research Shows That We Shouldn't Swallow Conservative Claims About Taxes

How the Rich Are Grabbing Bigger and Bigger Slices of Pie

by SAM PIZZIGATI

What Happens When Nations Cut Taxes For Their Richest Citizens?

Economists Thomas Piketty and Emmanuel Saez, two of the world’s most respected authorities on the incomes of rich people, have a straightforward answer: In nations that slash tax rates on high incomes, the rich significantly increase their share of national income.

Here in the United States, for instance, the tax rate on income over $400,000 has dropped by half, from 70 to 35 percent, since the 1970s. Over that same span, the households that comprise the “1 percent” have over doubled their share of the national income, to 20 percent.

In many European nations and Japan, by contrast, tax rates on the rich didn’t fall as fast or as far. And rich people’s slice of the income pie increased “only modestly,” note Piketty and Saez in a new analysis they co-authored with researcher Stefanie Stantcheva.

This phenomenon doesn’t trouble conservatives. High taxes on rich people, they claim, do terrible economic damage by discouraging the entrepreneurship that makes economies strong. Lower taxes on the rich, this argument continues, encourage entrepreneurs, who invest and create jobs when lower taxes let them keep more of the income they take in.

Yes, conservatives freely admit, the rich can and do amass plenty of money in a low-tax environment. They’ll even increase their share of national income. But the rest of us shouldn’t worry. Thanks to the rich, right-wingers argue, we all benefit from a bigger and better economy.

Piketty and his colleagues put these claims to the test. If the conservative argument reflected reality, they point out, nations that sharply cut tax rates on the rich should experience much higher economic growth rates than nations that don’t.

In fact, the three economists note, reality tells no such story. Nations that have “made large cuts in top tax rates, such as the United Kingdom or the United States,” they explain, “have not grown significantly faster than countries that did not, such as Germany or Denmark.”

So what’s going on in countries where the rich all of sudden face substantially smaller tax bills?

In countries that go soft on taxing the rich, top business executives don’t suddenly — and magically — become more entrepreneurial, more “productive.” Instead, they suddenly find themselves with a huge incentive to game the system, to squeeze out of their enterprises every bit of personal profit their power enables.

The more these executives can squeeze, the more they can keep. The result? The 1 percent in nations that cut taxes on high incomes proceed, as Piketty and his fellow authors put it, to “grab at the expense of the remaining 99 percent.”

Millions of us know this grabbing first-hand. We’ve seen corporate execs routinely outsource and downsize, slash wages and attack pensions, cheat consumers and fix prices.

How can we start discouraging these sorts of behaviors? Piketty and his fellow analysts have a suggestion: raise taxes on America’s highest-income bracket. Raise them as high as 83 percent.

This suggestion, the three scholars acknowledge, may right now seem politically “unthinkable.” But back between the 1940s and the 1970s, they remind us, the notion that we ought to raise taxes on the rich to reduce the incentive for outrageous behavior rated as our conventional wisdom.

In those years, policymakers — and the public at large — felt strongly that pay increases for the wealthiest Americans reflected “mostly greed or other socially wasteful activities rather than productive work effort.”

Is this mid-20^th century perception about pay at the top now about to make a comeback? Piketty and friends certainly think so. Let’s hope they have that one right, too.

Sam Pizzigati is an associate fellow at the Institute for Policy Studies in Washington DC, editor of the journal Too Much and author of The Rich Don’t Always Win, Seven Stories Press, New York, forthcoming 2012.

This column is distributed by OtherWords.

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If people who believe in American liberty are ever to see it reclaimed, I implore them to gather at RenewAmerica.com. Here, they will be participating in a media project whose purposes are so vital, so foundational, that without success here, I do not see how our liberty is renewed and restored.

In the present political environment of lies, rabid propaganda, and unbridled partisanship, it goes pretty much without saying that the "elites" who control America's so-called "mainstream" media dismiss us. They believe We the People of this country, our love of truth, our heartfelt fealty to freedom, and our rising defense of founding principles undergirding our constitutional republic no longer matter.

These elites count on the assertion that has become a mantra of their power: Perception is Reality. The "mainstream" media governs perception. If they ignore the truth, or distort the facts, or flat-out lie about reality — these things cease to be real for far too many Americans. Reality, history, truth are ruined and rewritten. With no record, they didn't exist.

People who resent this arrogant dismissal of their understanding, actions, and feelings need to face this hard reality. As things stand right now in this country, the dismissive, self-worshipping, haughty elites have every reason to conclude that their attitude is justified by the facts. Many people who "know" better still can't wait to get to a television set, or a propaganda organ like the New York Times or the Washington Post, to see whether the so-called "mainstream" media will validate their views. Many hesitate to give full credence to what they know from firsthand experience and internal wisdom, or to act upon it, because they do not find external reinforcement from the "mainstream" media.

If these United States are to survive and again thrive as a bastion of liberty...this MUST stop. We the People MUST gather and share the truth in forums free from the taint of elite control. We must rely upon the public reality we can discover and sustain that is forged with our own hands, and with the faith that founded and preserved this nation free.

As you probably know, RenewAmerica is a news, analysis, and commentary site that is a "non-profit enterprise" in the true sense of the term (even though it has never applied for IRS non-profit status, so as to remain free from government control). RenewAmerica is not a "business": it has no employees, sells no product or service, and accepts no paid advertising. It depends entirely on the help of volunteers and the contributions of supporters in order to offer one of the premier conservative websites on the internet — a God-fearing voice of moral reason unlike any other.

RenewAmerica is a gift to grassroots America, from fellow citizens who care deeply about the future of our country in these challenging times. All of us who participate at RA are dedicated to doing our part to "secure the blessings of liberty to ourselves and our posterity" (Preamble to the Constitution) — and we maintain that commitment at considerable sacrifice.

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Sikh Temple Shooting: Gunman Was On Feds’ Radar, Told Army Friend ‘Racial Holy War Was Coming’

Wade Michael Page, the man identified as the gunman in Sunday's shooting at a Sikh temple in Oak Creek, Wis., was eyed by federal investigators "more than once" because of ties to white supremacist and extremist groups, the Los Angeles Times reports, but federal officials "determined there was not enough evidence of a crime to open an investigation."

A senior U.S. law enforcement official would not tell the paper which law enforcement agency had "looked at" Page or when that happened.

The report comes a day after the Southern Poverty Law Center said it had known about Page—a member of at least two white supremacist bands—for more than a decade. The Montgomery, Ala.-based law center said it had been tracking Page since 2000, when he "attempted to purchase goods from the neo-Nazi National Alliance, then America's most important hate group."

Seven people, including Page, were killed in Sunday's shooting at the temple. The six victims identified by police—five men and one woman—ranged in age from 39 to 84.

[Also read: Was the Sikh temple shooting domestic terrorism?]

Christopher Robillard, who served with Page for three years in the U.S. Army, said he thought it was just talk when Page expressed his extremist views.

"He would often mention the racial holy war that was coming," Robillard told CNN's Piers Morgan on Monday. "And you know, we just looked at it as he was trying to get attention to himself. Because he was always the loner type of person. Even in a group of people, he would be off alone."