Eric Zorn, a writer for the Chicago Tribune, showed up in the La Crosse Tribune with an oddly title op-ed, A Lesson On How Progressive Taxes Really Work. Our former governor, Scott Walker has taken the Media Darling (MD) to task for her suggestion a top marginal rate of 70 percent. It is epically foolish for exactly the reason Scott states, it is not fair if you earn ten dollars and you parents take seven dollars. Here is a more technical explanation.
Eric tries to make two points. One is technically correct but only a distraction. He says that marginal rates and average rates are different. Yup. The question Eric and the MD don’t address is why they want to give such bad incentives to anyone.
Eric’s second point is that rates in the US and elsewhere have been much higher. George Harrison, as part of the Beatles, sang as part of The Taxman:
There’s one for you, nineteen for me
Cause I’m the taxman
to point out the foolishness of the 95 percent margin rate in the UK. JFK and Ronald Reagan revived the US economy and the UK was revived by Mrs. Thatcher who recognized the foolishness of such high marginal rates.
Why are such rates foolish? Because they cause folks to spend their time figuring out ways to avoid such taxes. Bjorn Borg and others moved to Monaco. Lots of financial advisors got rich. Flatter tax rates like we currently have eliminate lots of wasteful activity. They are also extremely progressive because income is more likely to be reported. Here is a 2014 report showing that the top one percent pay more in federal income taxes than the bottom 90 percent.
Near the end Eric comes to the real progressive point which is envy:
Conservatives who have pushed down top marginal tax rates and expressed nonchalance about the subsequent massive growth in the wage gap have so far kept such initiatives at bay.
Progressives want to attack the rich. Conservatives want to enrich everyone. The envy card has been effective for progressives. We’ve recently seen that seventeen year-olds can be heroes. Hopefully the fifth graders and everyone else can see through Eric and MD.