Certain stories will receive a news article no matter how stale and overdone they are. Groups of rich people asking to have their taxes raised is one such story. This time, it’s a group of 80 millionaires calling themselves “Millionaires for Humanity” begging governments to “Tax us. Tax us. Tax us” in order to combat the coronavirus.
Every time wealthy Americans beg to be taxed higher, it’s presented as a selfless act, an offering-up of their own money for the public good. But that’s not really what it is — after all, if individuals wanted to pay more in taxes, they are welcome to do so. The IRS has accepted gifts and donations from private citizens since 1843. That none of these millionaires report that they’ve taken advantage of this function proves that they, too, don’t really think the federal government is the best steward of their dollars.
Instead, it’s a request to tax other wealthy people — there were about 18.6 million millionaires in the United States in 2019. Then again, an article entitled “0.0004 Percent of Millionaires Want All Millionaires to Face Higher Taxes” has much less of a ring to it.
Of course, that alone isn’t enough to dismiss the proposal out of hand. The idea that the wealthy should face higher taxes is a popular one, which counsels a deeper dive.
First and foremost, it’s important to note that rich Americans do not pay less in taxes than poor Americans, despite that being a popular refrain among data-challenged politicians and pundits. Jason Furman, chair of the Council of Economic Advisors under President Obama, combined federal, state and local tax data and found that the poorest 20 percent of Americans pay just above 10 percent of their incomes in taxes. The wealthiest 1 percent pay a proportion around four times greater, or around 40 percent of their incomes. In other words, the wealthy are already shouldering the greatest proportion of the country’s tax burden.
But beyond misconceptions about how the tax burden is allocated, taking money away from private actors and putting it into federal coffers is often wasteful. As a 2016 report by the nonpartisan Congressional Budget Office (CBO) found, federal spending is simply less effective than private investment.
The CBO’s report shows that private sector investment creates twice as much economic growth as federal investment. At the same time, federal investment can at times actually be harmful, as federal spending requires either borrowing or taxation, either of which takes money out of the hands of private investors.
This means that any substantial effort to tax wealthy Americans in order to deliver relief to other Americans facing economic hardship in the coronavirus economy would have painful secondary effects. Permanent tax increases on the wealthy, be it through wealth taxes or corporate taxes, would slow the recovery and increase the amount of time that previously-employed Americans were forced to rely on the beneficence of the “Millionaires for Humanity.”
Does that mean that nothing should be done? Of course not. Smart, targeted solutions that provide bridge liquidity to businesses and individuals facing income disruptions are how the federal government has faced down this crisis thus far. Continued support of vaccine trials and other medications for treatment of coronavirus make sense as well, and relying on debt to finance them, while risky long-term, makes sense for now given the temporary nature of the crisis and low interest rates.
But what would be profoundly foolish would be to threaten the infrastructure that had the economy roaring prior to the onset of a once-in-a-century pandemic through the imposition of millstone taxes. A tax system that encourages growth and investment is crucial to eventually restoring an economy that can afford to cover the emergency expenditures this unprecedented crisis called for. It’s not for the millionaires’ sake that a strong economy is important; it’s for the millions of Americans who are facing unprecedented hardship in the face of this pandemic.
And for journalists, there’s simply no need to publicize every single rich person who wants to pay higher taxes. When the country’s economic system has created so many millionaires, it’s simply not interesting, let alone surprising, that 80 of them want higher taxes.
Andrew Wilford is a policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to tax policy research and education at all levels of government.