Democrat plans would cripple economic growth
Economic growth is more than an abstraction. An expanding economy is a healthy economy, one that increases living standards, provides robust employment opportunities and strengthens the public fisc. This week, the U.S. Department of Labor released statistics revealing that the Trump administration is doing a pretty good job in this regard.
Nearly 77 percent of the nation’s 3,092 counties saw an increase in gross domestic product in 2018, as the U.S. economy expanded at a rate of 2.9 percent, tying 2015 for the best growth number since 2005. Nevada’s Clark, Lincoln, Lyon, Douglas, Storey, Churchill and Mineral counties were among those in the top quintile of performers.
While federal spending remains out of control, the nation’s economy nevertheless received a jolt from the Trump administration’s tax and regulatory policies. Leaving more money in the hands of those who earned it and putting a modest leash on an aggressive administrative state have helped create the conditions necessary for record low unemployment, rising wages and increased consumer confidence.
All this is worth remembering when a Democratic presidential candidate suggests a massive expansion of the public sector along with higher taxes on the “rich.” Not only would these proposals for free stuff inevitably lead to significant new levies on the middle class, but new “wealth” taxes and other punitive schemes aimed at high earners would disrupt the entire economy.
For instance, Sen. Elizabeth Warren proposes a 2 percent tax on households with a net worth of $50 million, jumping to 6 percent for those with assets of more than $1 billion. Putting aside the legal defects in these proposals — the Constitution prohibits “direct” taxes — real-world experience in this regard is not encouraging. Since 1990, eight countries — many in Europe — have repealed their wealth taxes for economic and practical reasons.
“Taxing wealth is the same as taxing saving and investment (actually, it’s the same as triple- or quadruple-taxing saving or investment),” notes Daniel J. Mitchell of the Mises Institute. “And that’s bad for competitiveness, growth and wages. … You don’t have to be a wild-eyed supply-side economist to recognize that this is crazy.”
Indeed, Lawrence Summers, who served as treasury secretary under President Bill Clinton, warned that a wealth tax would devastate the economy, thus hurting the less fortunate. “I don’t think that taxation approaching confiscatory is remotely feasible and, if it was tried, would have catastrophic economic consequences,” he said on CNBC.
As The Wall Street Journal reported last month, Sen. Warren’s plan could result in some wealthy Americans paying an effective tax rate of “above 100 percent.” Perhaps that’s the point. Because let’s not pretend all these progressive tax plans are about promoting a higher standard of living or creating opportunity.