This article, from “To the Point News,” a subscription website with conservative commentary, reviews the French Revolution, but it also makes the important point that increasing taxes and regulation on “the rich” will decrease the incentive and the ability of the “the rich” to earn the money to pay those taxes. (A slightly different version of the column is available, here, for free.)
(See addendum at bottom.)
Of the 80% of Americans who still have jobs, most have experienced very little decline in living standards. But for those who have lost their job and been unable to find a new one, the shock, both to their pocketbook and psyche, has been severe.
In poor societies, there are always a few rich people; and in rich societies, there are always a few poor people. A successful society is characterized by fewer poor each year and more middle class and rich. Revolutions take place when the number of poor rises faster than the number of middle class and rich. The poor, being less educated and having more of a static view of the world, blame their increasing hardship and numbers on the rich.
The real villains are those in the political class who pandered to the voter by promising more in benefits to be paid for by others, whom are demonized as “the evil rich.” But if the rich people are taxed too much, they opt out by moving or no longer being rich, and then the tax revenues fail to keep up with the increases in spending until finally, the debt burden slowly sinks the ship.
This is precisely what is going on in the United States and most European countries at the moment.
As more and more people lose their jobs, the demand for government payments grows, making the situation worse and worse. The U.S. government is spending roughly 40 percent more than it is taking in. President Obama and others are demanding higher taxes on the “rich” – more correctly known as job creators – to pay for more government benefits. The self-delusion of the political class goes on, and the numbers get worse.
Notice that the president, when arguing that his “jobs” bill is going to increase jobs, quotes the same economists who also said his “stimulus” would keep unemployment under 8 percent, rather than referring to those economists who were correct in saying it would fail. The president’s assertion that by increasing the taxes on the rich he will be able to “pay” for all his new spending is fantasy, or worse.
The simple fact is that the amount of explicit and implicit debt that the United States and other governments have incurred cannot and will not be paid back in full. The political class will try to cure the debt mess with inflation, price controls, tax increases and confiscation, but it will only make things worse.
Greece is only the first canary to die. As more and more jobs and homes are destroyed by the debt crisis, the ranks of the revolutionaries will grow until, finally, the new “peasants” realize that the rich are gone and it is the political class who is responsible for the mess.
As Mr. Obama and many liberal Democrats embrace the Wall Street protesters, I wonder if they have not only forgotten (or ever knew) good economics, but also the lessons of history. Maximilien Robespierre, a great orator, most certainly did not intend for himself to be guillotined as he and his colleagues unleashed the Reign of Terror during the French Revolution.
As his Committee of Public Safety replaced the Committee of General Defense and his Committee of General Security (sounds all too much like “Homeland Security” organized the secret police, it is most unlikely that he thought the organizations he headed would end up beheading him.
The Reign of Terror was launched with the King of France, Louis XVI, guillotined in the Place de la Revolution (now the Place de la Concorde) in Paris on January 21, 1793, and reached full fury with the Queen of France, Marie Antoinette, guillotined there 9 months later on October 16. The revolutionary slaughter ended with the “National Razor” falling on Robespierre’s own neck on July 28, 1794.
The French were subsequently slow to follow the American democratic model – the ballot box – which is a much cleaner and more civilized way to get rid of failed leaders.
We can look forward to the day when the current political actors, like Jimmy Carter now, merely dance around us with occasional annoying utterances rather than stealing from our pocketbooks and chipping away at our liberties.
Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.
As evidence in support of the above, here are links to two Wall Street Journal articles, one from 2009 and one from this year:
Maryland couldn’t balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O’Malley, a dedicated class warrior, declared that these richest 0.3% of filers were “willing and able to pay their fair share.” The Baltimore Sun predicted the rich would “grin and bear it.”
One year later, nobody’s grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April.
Speaking of “millionaires and billionaires” (see here), the real tax news is that there are fewer of both these days. This month the IRS released more detailed tax data for 2009, and the nearby table records the decline of the taxpaying rich.
In 2007, 390,000 tax filers reported adjusted gross income of $1 million or more and paid $309 billion in taxes. In 2009, there were only 237,000 such filers, a decline of 39%. Almost four of 10 millionaires vanished in two years, and the total taxes they paid in 2009 declined to $178 billion, a drop of 42%.