Rich lefties and their taxes

By Larry Elder

Ah, the hypocrisy of tax-hikers who do everything they can to avoid the taxes they wish to impose on others.

Sen. John Kerry, D-Mass.: He tried to avoid $500K in his home state’s sales and excise taxes by docking his newly purchased $7 million 76-foot yacht in Rhode Island.

Massachusetts lowered its state income tax in 2001. Given the presumably large number of rich people who pine to pay more taxes, the state allowed tax filers to check a box and voluntarily pay the old, higher rate. In a liberal state of over 3 million tax filers, how many volunteered to pay the higher rate in 2004? A tiny fraction of 1 percent – 930 taxpayers.

Among those who refused to pay the higher rate? Sen. Kerry and Rep. Barney Frank. In Frank’s case, he refused to pay the higher rate because, he says, “I don’t trust the legislative leadership and Gov. (Mitt) Romney to make the right decisions.” Instead, Frank said, “I’ll donate the money myself.”

John Edwards, former senator and Democratic presidential candidate: His wife, Elizabeth, once called him a person of “character” because Edwards voted against his own economic “interests” by voting for higher taxes. Well, OK, but like billionaire investor Warren Buffett, who urges higher taxes, Edwards is less than keen on paying them. As a lawyer winning major jury awards, John set up a subchapter S corporation to pay himself through dividends – and thus avoid $600K in Medicare payroll taxes.

Kennedy patriarch Joe Kennedy: The late Ted Kennedy and his family shield their money through a series of complicated family trusts first begun by father Joe Kennedy. The trusts transfer wealth from generation to generation while avoiding estate taxes.

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The late Ohio Democratic Sen. Howard Metzenbaum: A liberal’s liberal, Metzenbaum enjoyed a lifetime rating from Americans for Democratic Action of 95 (100 being perfect) and a zero from the American Conservative Union. He never met a tax hike he did not like. He moved to Florida when he retired from the Senate. Why Florida? No state estate or personal income taxes.

“Civil rights” leader and MSNB-Hee Haw host Al Sharpton: Though he supports increasing taxes on the rich, Sharpton, it seems, fails to do his part as a member of the 1 percent. As of last year, according to the New York Post, Sharpton owed $3.5 million in state and federal income taxes. His nonprofit, the National Action Network, as of 2011 owes nearly $900K in unpaid federal payroll taxes.

What do these individual instances of hypocrisy say about whether taxes should be increased on the so-called rich?

First, contrary to Buffett’s assertion, people absolutely make decisions and change behavior in response to taxes. Compare the economies of Texas and California, two border states with similar immigrant populations. Texas is a no-income-tax, right-to-work, business-friendly state with substantially less regulation than the Obama-like high-tax (especially on the “the rich” and on business), forced unionism, heavily regulated state of California. Texas also has one of the lowest per-capita spending rates, while California has one of the highest.

The result? According to Investor’s Business Daily, state gross domestic product growth in Texas was 3.3 percent in 2011 and 5.2 percent in 2010, while California was 2 percent in 2011 and 1.7 percent in 2010. Texas has created more than twice as many new jobs as California and has a below-the-national-average jobless rate of 6.8 percent. California’s unemployment rate is 10.2 percent.

From 2008 to 2011, Texans’ median hourly wages rose 8 percent, while Californians’ rose 5.7 percent. And per-capita personal income during those years rose 1.3 percent in Texas, while falling almost 1 percent in California. California’s poverty rate is 23.5 percent, to Texas’ 16.5 percent, and Texas spends less on education, while its students outperform their California counterparts.

Second, because people change behavior in response to taxes, raising them can result in getting less revenue. John Kennedy said, “It is a paradoxical truth that tax rates are too high today and tax revenues are too low – and the soundest way to raise revenues in the long run is to cut rates now.”

The Congressional Budget Office just issued a report on what would happen to the economy if Congress fails to retain the Bush-era tax rates. Keeping the Bush-era rates for all but the rich, the CBO says, adds 1.25 percentage points to GDP. Retaining tax rates for all, including the rich, however, adds 1.5 percent to the economy. In other words, raising taxes on the rich lowers economic output. Does a quarter of a percentage matter? The CBO says it will “only” reduce job growth by about 200,000 jobs – although other reputable studies put the number at 700,000 jobs.

Taxes matter.

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Larry Elder

Larry Elder is a bestselling author and nationally syndicated radio talk-show host. To find out more about Larry Elder, or become an "Elderado," visit www.LarryElder.com. Follow Larry on Twitter @larryelder. Read more of Larry Elder's articles here.


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