Sticking it to the Rich

When it comes to tax policy, the liberal wing of the Democrat party (that includes virtually all of those holding public office north of Eugene and west of Bend) has one of the most myopic points of view witnessed anywhere. Their point of view is consistent with their campaign rhetoric of class warfare. It is designed to portray a society of have’s and have not’s and to pit one against the other. It assumes that the redistribution of wealth will heal all societal ills.

But that tax policy belies the realities of the global economic world. Okay, it’s cute, and it makes them feel good, to demand that tax increases fall solely on the wealthy but that tax refunds, rebates or reductions be distributed on a pro rata basis rather than a contributions basis. You’ve already seen these liberal Democrats argue that the person that pays $10,000 in taxes should get exactly the same amount in reductions or rebates as the person paying $100 in taxes. And while intelligent people shake their collective heads in wonder, the beneficiaries of this type of policies snicker to themselves and rush to the front of the line – and probably vote for the Democrats in the next election in hopes of another windfall.

But there are two areas where these tax policies are creating economic aberrations that are injurious to Oregon in both the short and long run – the capital gains tax and the inheritance tax. Let’s deal briefly with each.

Capital gain represents capital growth and capital accumulation. That occurs primarily as a result of business growth. Business growth is the only factor representing job growth. (Okay, yes, government does provide a steady growth in jobs but that comes at the expense of growth in taxes which, in turn, is a drain on business growth, capital growth and private sector job growth. There is really no economic growth realized through the growth in government.) To the extent that business can attract capital, grow capital, and retain capital, it can expand and create additional jobs. Conversely, to the extent that taxes erode the ability to attract, grow and retain capital, business growth and job growth are adversely impacted.

In today’s global economy, business has a choice as to where to deploy capital (create jobs). While taxes are not the sole determinant of where to deploy capital, they are a significant determinant. All things being equal, capital will move to the place that has the lowest tax burden. Thus, a comparatively high tax burden, in this case capital gains taxes, discourages the deployment of capital in Oregon. And again, the lack of capital adversely impacts job growth. So, while liberal Democrats profess to represent the working men and women of Oregon, their insistence on maintaining one of the highest capital gains taxes in the country deprives the very constituency they profess to represent the opportunity to obtain quality jobs with quality wages. Despite relatively low unemployment nationally, Oregon retains one of the highest percentages of unemployment in the nation – these types of tax policies are a major contributing factor. (Of course, the only groups not effected by such policies are the public employee unions who benefit from high taxes and who currently dominate Oregon Democrat policies.)

The second area is inheritance taxes. Again the liberal Democrats like to portray this as a tax on the rich and thus continue to promote the concept of class envy. They have steadfastly refused to consider either reducing the inheritance tax or raising the exemption. God forbid that would be a (gasp) “tax break for the rich.” Therein lies the stupidity of that concept. The rich are ultimately mobile. Every tax advisor worth his/her salt tells the “rich” that the first element of estate tax planning in Oregon is “leave.” The situs for the taxation of intangible property (stocks) is the residency of the owner of the stock. When the owner of the stock moves to another state the ability to tax that intangible property moves with him/her. The “rich” in Oregon avoid the state’s high inheritance tax by simply leaving. And in leaving, they take not only their future inheritance taxes but also the current income taxes and their charitable contributions to Oregon communities’ activities. If you doubt the veracity of this statement simply look at the Portland business leaders, including a succession of heads of the Portland Business Alliance who move from Portland immediately after retirement.

So if the “rich” avoid Oregon’s high inheritance taxes, who gets stuck paying them? Well, generally, it is the farmers, ranchers and small business men and women seeking to pass on their land and operations to the next generation in their families. The high tax burden often forces these stalwarts of Oregon’s economy to mortgage their futures or defer capital replacements or improvements to pay the tax burden. Oregon depends primarily on small business for economic growth and such tax burdens adversely effect their ability to grow. While the liberal Democrats purport to represent the interests of small business, the fact of the matter is that their resistance to reduction of the inheritance tax disproportionately burdens these small business owners while the “rich” avoid the burdens through mobility.

In the end, if you want to determine tax policy based on what makes you “feel” good – sticking it to the rich – instead of what “is” good – encouragement of economic (job) growth, you will make the same kind of mistakes that Oregon’s liberal Democrats have imposed on the state for years. In all probability, however, most Oregonians (other than the public employees unions) would rather have a good job than “stick to the rich.”

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Posted by at 06:37 | Posted in Measure 37 | 15 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Jerry

    Remember, these very same people truly believe that it is wrong for a poor person to pay the same for a loaf of bread as a rich person does.
    They are fools – plain and simple.

  • Excellent post Larry!

  • homer12

    Owning land is one of the ways ordinary people climb up the big ladder to get their slice of the cherry pie. Doing it costs a heavy penny and awholealotta time. Why tax such noble effort through a death tax?

  • Britt Storkson

    The truth is that the rich don’t pay taxes. Leona Helmsley was right when she said “Only the little people pay taxes”. Relative to what they make the middle class and working poor pay a most of the taxes. The key phrase here is “relative to what they make”.
    If you make $20,000 per year and pay the typical 35% of what you make in taxes ($7,000) and some rich person makes $200,000 per year and pays 5% of what they make in taxes ($10,000) who pays more tax?
    Why is it that two of the richest men on the planet William Gates Sr. and Warren Buffett Jr. are dead set against repeal of the estate tax? There is something wrong with this picture. With the supposed huge amount of taxes they pay one would think they would be for most any measure that would reduce their tax burden. But that’s not the case. Why? Because THEY DON’T PAY THEM!
    On top of that with corporate welfare where our tax money goes directly into the pockets of the rich one could easily argue that we have a “Reverse Robin Hood” scenario where our government takes money from the working poor and middle class and gives it to the rich. There are many examples of this.
    Much can be written on this subject and I’m only getting started. I’ll look forward to reading the responses.

  • John Fairplay

    “If you make $20,000 per year and pay the typical 35%”

    obviously, britt knows nothing about the tax code. no one making $20,000 per year is likely to pay any federal or state income taxes at all particularly if they have a family of any kind. the income tax system – in oregon (slightly) and federally (very) is progressive. the truth is that the more income you declare, the higher the average rate you pay. “the rich” – depending on how you define “rich” – pay the vast majority of all the federal income taxes that are collected. someone ain’t pulling their fiscal weight in this society, but it’s not the rich. the top 1 percent of earners pay over 1/3 of all federal income taxes, and the top 50 percent of earners pay over 96 percent of all federal income taxes. that means the bottom 50 percent – which includes all the poor, but not solely the poor – pay less than 4 percent of all federal income taxes. get your facts straight.

    • Britt Storkson

      When I say “pays taxes” I mean all taxes…property, sales, fees and a myriad of other ways government extracts money from the citizens. Mr. Fairplay you did not respond to my two questions: The one about the estate tax and the one about those paying 5% of what they make or 35% of what they make. Which tax system would you rather have?
      No, I don’t understand much about the tax code as my skills are in other areas but I do understand that there is a reason for most everything including the tax code. If there were no advantage then why are there thousands of tax shelters, offshore tax havens, and hundreds of pages of tax code that mostly exempts the wealthy from taxes in addition to imposing the taxes we pay. The truth is that the top marginal rate is virtually meaningless. It’s just a starting point where all of the “discounts” (if any apply) are figured in.
      Also why does one pay Social Security taxes only on the first $90,000 or so of income. Why not pay taxes on the entire amount? Also, why is income redefined?
      I’ll look forward to your reply.

      • Anthony

        I think the social security contributions end at $90K because someone making that much money is financially independent and capable of providing for his or her own retirement.

        Social security is a forced savings account for people who the government feels is unable to provide for themselves. Someone making $90K+ does not fall into that category.

      • Chris McMullen

        Sorry Britt, you’re completely misinformed. Everybody pays embedded sales/property taxes and fees — and the poor (those making under $25K) basically pay no income tax and actually get more money back at the end of the year! I know many single mothers and lower income folks for which this has happened to.

        Moreover, the poor are the ones getting way more from Social Security than they ever put in.

        Those making over $150K are footing the bill for the vast majority of taxes. It’s a proven fact, go look it up.

        And regarding the estate tax, it’s totally unfair. Why should anyone have to pay taxes on something they own when they sell it? Especially land. I pay income taxes and property taxes on my house and then I’m supposed to pay taxes on the profit when I sell it? Just how is that fair?

  • Jerry

    Britt is foolishly ill-informed. The Top 50% pay 96.54% of All Income Taxes in the US. That is FACT.
    Gee whiz – wake up – I wonder just what your skills are in the other areas – I guess they are not math related….

    • Brian

      I love how you’re always a stalwart of intelligent debate and banter on here. I bet you change a lot of minds. No wonder the republican party is doing so well in oregon.

      • eagle eye

        LOL!

        And imagine, that guy Britt even counts taxes other than income tax!

  • Jerry

    I am not trying to change minds. It is way too late for that. Just pointing out the FACTS and wondering why you guys can’t figure them out. That’s all. You dig?

  • Britt Storkson

    So far no one has directly answered the questions I put forth. I’ve received a lot of put-downs but no answers. Another question: At one time there was talk of imposing a 17% flat tax on income with no deductions. That went nowhere. If the well-to-do pay at least 28%, as we’re told, then why was there no interest in an 11% tax reduction? It’s because the well-to-do don’t pay even 17%!
    Regarding Social Security tax it’s just another tax. It is not a “forced savings account” as there is no guarantee that one will ever get back what they contribute to social security…i.e. someone dies before becoming eligible after paying social security taxes his/her life. Social Security. Benefits are not paid out based on how much was paid in.
    This is not class envy. This is just a discussion of who pays taxes and who doesn’t. The issue is not so much the amount of taxes it’s WHO PAYS WHAT. If we define tax fairness as everybody paying the same percentage of what they make then our tax system is not fair.

  • John Fairplay

    i’m willing to take a shot at a couple of these. first, no one on the left would define tax “fairness” as bill gates paying the same rate on his income as someone who makes $20,000 per year. the left wants gates to pay 90 percent of everything he makes, and the $20,000 person to pay nothing. so your premise is fatally flawed.

    social security is not guaranteed – however, it is designed to pay back a larger percentage of their earned income to those with low incomes than those with high incomes. it’s a classic income redistribution scheme. the “cap” should be lifted and the rates adjusted to make the action revenue neutral. we could probably dramatically lower the rate on the first $20,000 earned (just to pick a number) by doing so.

    in order to impose a flat tax at the federal level, it would take a 28 percent tax rate to make it revenue neutral – that is, raise as much money as the current system. it would, therefore, be a huge tax increase on the middle class, and that’s why it didn’t (and won’t) go anywhere.

    i always have to chuckle a little at the complaining about people sheltering income from taxes. i would urge anyone (especially liberal elected officials) who is concerned about this to publicly and loudly advocate for the repeal of the home mortgate exemption, and the deductibility of state property and income taxes, and charitible contributions. these are the primary shelters, and are overwhelmingly used by – and popular with – america’s middle class.

    the only purpose of a tax system is to raise money for government programs. it does not have to be fair, or equitable or embrace any other moral aspect of society. it certainly should not be used as a weapon to punish those who have amassed more assets. the current tax system – both federally and in oregon – generate more than sufficient revenue to provide for public needs if only we had elected officials who would fund only those programs that are truly necessary for the “public good.”

  • Jerry

    John –
    Nicely said above. Britt is just a bit mis-informed and you notice he never responed to the fact I stated about the top 50% paying over 90% of all income tax. It doesn’t matter how many “breaks” there are – they are there for a reason – but he has to know the poor don’t pay much in taxes – they can’t – as they are poor. Our system is massively regressive now.
    I wonder if Britt takes advantage of any of these “tax breaks” or does he just send in a bunch of his money to “help out”?
    Why can’t they see what is going on? A state that taxes so much that money is left over, even after wasteful and wanton spending, can’t possibly need even more.
    Britt – I encourage you to make a whole bunch of money and then send it all in. That is obviouslyy what you want everyone else to do.
    Go for it! We are behind you all the way. People are dying in the streets, remember, because of Ballot Measure 5, and not enough has been done to correct it. Taxes should be much, much higher than they are now. Otherwise, it is simply not fair.
    Gee, these rich people are getting away with murder! They simply are selfish, bad people for wanting to actually keep some of the money they have earned.
    How many poor people hire other people to work. I wonder?
    Britt – do you work for a poor person? If we did not have the rich, who would we work for? The government I supppose, but where would they get their money.
    Rich people are not bad people – and they do pay enough right now – even more than enough, dare I say.
    Britt – maybe you would be happier in Cuba – they have really done a fine job with wealth redistribution there. Plus, it is warmer.

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