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As April 15, income tax day, approaches, Congressional Democrats are proposing significant increases in taxes to fund new programs. U.S. Rep. Alexandria Ocasio-Cortez, D-N.Y., has proposed a 70 percent federal income tax on incomes above $10 million. Other Democrats have proposed similar levies. Proposals such as providing Medicare for all and the Green New Deal would require significant new expenditures and revenue to support them.
Is it really possible to tax the rich to fund fully such new initiatives?
Many Democrats certainly think so. New York Mayor Bill de Blasio says, “Here’s the truth, brothers and sisters, there’s plenty of money in the world. Plenty of money in this city. It’s just in the wrong hands!” Ocasio-Cortez says “a system that allows billionaires to exist” is immoral. U.S. Sen. Elizabeth Warren, D-Mass., says, “We are the wealthiest nation in the history of the world — of course we can afford these investments.”
Let’s try some hypothetical exercises to test out the theory. The Trump administration has asked for $4.7 trillion in spending for fiscal year 2020. One way to raise this revenue in a progressive manner would be to confiscate all income, starting with the wealthiest Americans. Based on the latest Social Security wage statistics tables from 2017, raising $4.7 trillion starting at the highest income levels would require all the taxable earnings of over 35 million Americans. The government would have to take away completely all taxable income of individuals earning over $65,000 in 2017 in order to cover the proposed spending for fiscal year 2020.
If, on the other hand, we were to “outlaw billionaires,” a good place to start would be the Forbes 400 list of wealthiest Americans. So what if we confiscate billionaires’ money until we have funded the 2020 federal budget? Surely that would cover years of federal spending and leave plenty left over for new programs. Or would it?
The budget proposal of $4.7 trillion annually represents $13 billion daily. If we start with Forbes billionaire No. 1, Jeff Bezos, with $160 billion in net worth, we can fund the federal government for 12 days. Now who’s next? Bill Gates and his $97 billion can take us about out to Jan. 20. Next up is Warren Buffet with $88 billion, who takes us out to Jan. 27. This isn’t going very well. We have reduced the three wealthiest Americans to food stamps, and we are not even out of January yet!
It is obvious where this leads. Take all the wealth of the Forbes 400 (a total of $2.9 trillion) and we can only fund the federal government for 225 days, or into the middle of August. Now all those billionaires are a welfare expense to the government rather than a revenue source for the government. And we also have bankrupted state and local governments that are equally dependent on the success of these wealthy Americans.
Progressives might protest and say corporations are not paying their fair share. When they lobby for tax loopholes and then use those loopholes, or when cronies in government give them preference over competitors, they deserve criticism. Many reforms are worth discussing, but remember: Corporations provide the majority of the income to the working Americans paying the individual income tax. The stocks and bonds of corporations are central parts of the pension, investment, and college funds of many Americans. Impairing or confiscating those investments will only increase dependence on government.