In his first New Year’s Eve address since taking office, French President François Hollande—progressive poster boy and role model for class warriors the world over—defended his efforts to increase the top marginal income tax rate paid by France’s millionaires to 75 percent by appealing to a concept he termed Fiscal Justice. I had never heard that catchy phrase, which Hollande succinctly defined as, “Those who have the most, will always be asked for more.”
Get it? The rich will always be asked for more. You see, in politics it’s the asking that matters, not the getting. Immaterial to the concept of Fiscal Justice is whether those whom politicians ask to pay society’s mounting bills actually end up forking over their money or instead flee the country, as numerous French millionaires seem to be doing. As in all things progressive, policies are evaluated based on intentions, not results. So if raising marginal tax rates causes a decrease in tax revenue thanks to a combination of legal tax avoidance, illegal tax evasion, and voluntary emigration, so be it. Fiscal Justice has been done!
The same mentality now rules in Washington, where a majority of our lawmakers have surrendered to President Barack Obama’s relentless drive to soak the rich—or at leastbe seen to do so. The additional income tax revenues from higher marginal tax rates on the reviled 1 percent don’t amount to much—around $60 billion a year, equivalent to a few days of Washington’s spending—and the bill also raises payroll taxes on another 75 percent of Americans. Apparently the non-rich socked with higher taxes are counted up as collateral damage, like innocent bystanders in a class-warfare drone attack. Again, the important thing is that Fiscal Justice will be done!
A closer look at the numbers shows how intentions compare with actual results. The additional $600 billion which the new higher marginal tax rates are forecast to bring in over 10 years is about one third of the $1.8 trillion in additional tax revenue George W. Bush collected when he cut income tax rates across the board. You heard that right. Bush increased actual tax revenue over that collected by President Bill Clinton by cutting marginal tax rates.
Difficult but necessary spending cuts were put off for another day. The dreaded sequestration—feared and loathed by both parties because it is the only legislation that actually cuts spending rather than merely reduces its rate of growth—has been delayed until the Return of the Cliff in March. Then we’ll get to watch the theatrics all over again as looming spending cuts coincide with the moment the federal government really, really hits the current debt ceiling.
The lefty blogosphere is pleased that at least some rich people got the whacking Obama promised to administer while on the campaign trail, thought they feel cheated by his failure to also punish those making between $250,000 and $450,000 a year. But thanks to Obama’s commitment to Fiscal Justice, you can count on those folks eventually being asked for more. Do not believe for a moment that this game is over.
A rational observer can only come to one conclusion. When it comes to passing bills that hike tax rates on “the rich,” it is totally irrelevant whether those cause the deficit to grow or shrink. For that matter, whether the economy itself grows or shrinks is a secondary consideration. Ditto for whether the absolute standard of living of the poor and middle class improves or declines. What matters to populist politicians is theperception that they are sticking it to the enemies of the people who dare elevate themselves above the common man by earning higher incomes.
If progressive policies can’t be used to tax “the rich” out of their money, Fiscal Justice proponents would be equally happy to burn it. And that is exactly what inflation does—punishing investors and savers while destroying capital and empowering those debtors, spenders, and cronies closest to the Fed’s printing presses.
Fiscal Justice seems destined to prevail one way or another. So rejoice, progressives, while the rest of us mourn.
Bill Frezza is a fellow at the Competitive Enterprise Institute and a Boston-based venture capitalist. You can find all of his columns, TV, and radio interviews here. If you would like to have his columns delivered to you by email, click here or follow him on Twitter @BillFrezza.