It seems that more often elections at the national, state and local level turn on taxes. While no one enjoys paying taxes, the constant tax complaining is misplaced, in my opinion.
Tax complaints are often used to criticize liberal economics. Liberal economics holds that the so-called “trickle down effect” is wrong. Allowing wealthy individuals to keep more of their income has not resulted in more American jobs and is rapidly dismantling the middle class.
Money actually trickles up. One person’s taxes is another’s income. And as workers buy cars, home repairs, and food, the money spreads through the economy in general. Overall, the economy is helped when government money is inserted into the bottom of the economic ladder through infrastructure projects, research, educational funding, and public facilities that make our communities more livable.
Eventually, money moves up the economic ladder, helping all it touches along the way until it works its way back up to the top.
Today, the money is stuck at the top. In the 1950s and ’60s, when the economy worked better for ordinary people, the marginal income tax rate on the highest earners was over 90 percent (compare to today, about 38%). Through some morally corrupt political and economic legerdemain, some wealthy financial managers pay a lower tax rate than their struggling secretaries. And corporations stash over $2 trillion of untaxed earnings in banks in the Cayman Islands and elsewhere.
Certainly, it’s hard for most of us to imagine why someone would need more than, say, a few million dollars a year to live on. If someone, through good luck and hard work, can wrangle a salary higher than that, let’s stop complaining about wealth inequality and increase the tax rate to return the excess to the economy.
Here in Vermont, the state tax rate has been pegged to the national tax rate. As the national tax rate has declined, Vermont’s income tax revenues have declined. The problem, then, is not that spending is too high, but that government revenues are too low.
Imagine if the federal government had the revenue to fully fund the special education mandate. Property tax rates would lower significantly. Suppose the government gave block grants to communities for their schools (these actually existed at one time). Again, property taxes would fall.
This is not to say that government should spend money needlessly or wastefully. But let’s see the problem for what it actually is. Let’s stop the distorted call for tax relief and replace it with a demand for tax fairness.
Richard H. Bernstein, M.D.
North Ferrisburgh