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3 Lies Republicans Tell to Defend Not Raising Taxes on the Wealthy

Last updated on February 8th, 2013 at 02:36 pm

The political consensus may be shifting on raising taxes on the wealthy, but many Republicans keep sticking to these falsehoods in order to oppose a tax hike for the rich.

1). Raising taxes on the wealthy will hurt economic growth and the job creators.

In October, Speaker of the House John Boehner wrote, “As a former small businessman, my experience has taught me that raising taxes on families and small businesses will only hurt job creation. We need to be encouraging the private-sector to grow; raising their taxes will only discourage job creation, innovation, and entrepreneurship.”

This is a myth spun more out of belief, than history and fact. Republicans love to bring up how Ronald Reagan lowered taxes and the economy grew, but this isn’t the whole truth. Ronald Reagan did lower taxes in 1981, but he wiped out that tax cut by raising taxes in 1982 and 1983. Reagan also raised taxes in 1984 and 1986. The economy actually dipped after the 1981 tax cut, and returned to normal growth after taxes were increased.

A direct comparison of the Bush tax cut with Clinton tax increase shows the difference in economic growth. According to the Center for American Progress, “Overall economic growth was much slower under the Bush administration’s tax policies than under the Clinton administration’s tax policies. Real gross domestic product grew by 26 percent in the six years after Clinton’s tax increases. But real GDP grew by just 16 percent in the six years after the Bush tax cuts began. In fact, that six-year growth rate was low even by general historical standards. The average real GDP growth in any given six year period (from any quarter to the same quarter six years later) since World War II was 22 percent.”

The historical data shows that increasing taxes a little bit on those at the top helps real small business owners and middle class individuals. The blunt truth is that Republicans don’t have a single example using non-partisan data of federal tax cuts growing the economy, so they cling to their belief even harder and tell America that this time they know the tax cuts will work.

2). Income over $250,000 isn’t rich/Obama’s tax hike will hurt the middle class.

This is a more interesting discussion, but Republicans base their premise on belief instead of actual numbers. According to the Census Bureau, the median income in the US is $50, 054. The Tax Policy Center ran the numbers and found that, “About 6.07 million Americans earned above $200,000 in 2011. They make up the top 4.2 percent of taxpayers. But their income, an estimated $3.5 trillion, represents 32.5 percent of all the cash income earned.” (It is interesting to note that among those making $1 million or more a year, 42% of their income comes from capital gains. Also, these people are so opposed to Obamacare because they are going to be hit hard by the 3.8% Obamacare surcharge on unearned income over $250,000.) PolitiFact reviewed IRS statistics and found that 98.2% of tax filers had an adjusted gross income less than $250,000 per year. It is important to note that the tax increase will apply not to gross income, but adjusted gross income.

This discussion is interesting because for people who live in more expensive parts of the country, $250,000 isn’t as much as it is for those who live elsewhere. Those who make $250,000 could be considered middle class in New York or LA compared to being better off at the same income level in Cleveland, Detroit, or Pittsburgh.

Overall, the idea that a small tax hike on about 2 million taxpayers will somehow shatter the economy becomes laughable the numbers are reviewed. (This is why Republicans avoid at all costs basing their tax arguments on accurate data.)

3). Cutting taxes for the rich benefits everyone.

Republicans have been using the Laffer Curve to argue for trickle down economics for decades, but with with the repeated failure of trickle down, conservatives have been forced to stop using the term while still advocating the principles behind trickle down economics. All through the 2012 campaign the Romney/Ryan ticket argued, based on trickle down principles, that a massive tax cut for the wealthy could fix the economy and benefit us all.

A recent study by the non-partisan Congressional Research Service found that tax cuts for the rich don’t grow they economy, but they do increase income inequality, “The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, the share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009. Tax policy could have a relation to how the economic pie is sliced—lower top tax rates may be associated with greater income disparities.”

Keep these points in mind as you listen to Republicans discuss the fiscal cliff and raising taxes on the wealthy. Most of the Republican argument for not raising taxes on the rich, just isn’t true.

Jason Easley

Jason is the managing editor. He is also a White House Press Pool and a Congressional correspondent for PoliticusUSA. Jason has a Bachelor’s Degree in Political Science. His graduate work focused on public policy, with a specialization in social reform movements. Awards and  Professional Memberships Member of the Society of Professional Journalists and The American Political Science Association

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