Elizabeth Warren Is Impressively Wrong About Taxes. So Are Her Critics.

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As a reporter of the news, and even as a reporter of news in slanted fashion, the New York Times contradicts the opinions of those it favors more than it realizes. Elizabeth Warren in particular. None of this is purposeful, but consider what’s long been news at the Times: the top 10% of earners in the U.S. account for roughly 90% of investment in the U.S.

None of the above should really surprise us. The rich, or for that matter the merely well-to-do, logically have more savings after purchasing life’s essentials. As a consequence they have more money to invest. In reporting the news, the Times regularly relays to readers that America’s rich are the source of the vast majority of investment. No doubt they pass on this information to make a case for fleecing the rich, no doubt the candidates they favor use it in the same way, but there’s a contradictory quality to all this. Call what the Times reports about investment news, call it a statement of the obvious, but whether one, the other, or both, this news exists as an inconvenient truth for Warren. It's also inconvenient for her critics. Please read on. 

To see why, consider her confident assertion about how taxes would be levied were she elected president. About what Warren yearns for, or “has a plan” for, let’s make it clear up front that "want" and "get" are two entirely different things in politics. It seems both sides of the ideological divide frequently forget this in their criticisms of policy proposals. Whatever the good or bad of what Warren desires, she likely won’t get a fraction of it if ever elected president. Thank goodness. Lest we forget, presidents propose policies while Congress is where policy is made. It’s not realistic that Congress will give Warren anything close to what she wants.

So if it’s accepted that policies promised by national candidates have exceedingly little to do with what will be passed once they’re in office, in the recent Democratic debates Warren talked confidently about her plan to “pay” for her domestic agenda. As she put it, “I have made clear what my principles are here, and that is costs will go up for the wealthy and for big corporations, and for hard-working middle-class families, costs will go down.”

Alright, Warren aims to pay for all manner of goodies for America’s vast middle and she’ll reach into the pockets of the rich to do so. Assuming again what thankfully will never be true, that Warren would have unchecked power as president, her expressed policy proposals run counter to America’s middle earners. Think about it. And try to think about it honestly, with what the New York Times reports about investment top-of-mind. The rich, or well-to-do, once again account for nearly all investment.

What the above tells us is that assuming Warren were a dictator, assuming the party she would presume to lead were economically suicidal, and assuming the electorate wouldn’t correct Warren’s hard left view of the world by dividing up power, her policy plans would very quickly neuter the economic chances of the middle classes in the U.S. Opportunity and jobs are a consequence of savings and investment, which means an unchecked Warren would quickly reveal herself as the greatest enemy of the middle classes in the U.S. Of course, it’s worth pointing out yet again that if Warren aims to govern as a hard left redistributionist once in the White House, she’ll soon be doing very little governing. If readers doubt this, look up how long Barack Obama presided over a Democrat-led House of Representatives….

Which brings us to the response to Warren from the right. Responding as though Warren will literally have unchecked power once in the White House, they frequently commentate as though what Warren wants has some kind of reasonable chance of becoming law. That’s not realistic. The right know better. But as a recent editorial from a conservative publication put it, some on the right are at least acting as though they don’t. As the editorial contended, “the only way to pay for” Warren’s expansive policy agenda “is to raise taxes on the middle class, which is where the real money is.” The response fails in two obvious ways.

For one, the editorialists are operating under the false assumption that the rich whom Warren claims she’ll tax exclusively can be taxed in isolation. In that sense they’re confirming what Paul Krugman and others believe, that taxes can be increased on those who essentially have way more money than they know what to do with. Though conservatives generally reject the policies of people like Warren, and those who give her editorial cover like Krugman, they fail to point out that there’s no way for the Democrats to truly hike taxes on those with more money than they know what to do with without bringing serious pain on those who don’t: the middle class.

More than either side would like to admit, a tax increase on the other guy is a tax on everyone. Congress doesn’t tax away our dollars earned to stare lovingly at the money; rather it taxes away the money because it means extra control for the political class over the economy. That’s a tax on all of us, and it’s a cruel one. If a lot of central planning hurts, so does a little. Get it? Even crueler to the middle class is when taxes are foisted on the rich. We know why this is, and the Times tells us why: the rich account for nearly all of the investment in the United States. Tax them, as Warren desires, and opportunity shrinks. Contrary to what’s suggested at the Journal, any tax on anyone, the rich most of all, is a tax on the middle class.

As for the notion that the “real money” is in the middle, come on. That’s not reasonable, nor is it true. Thankfully the U.S. is a free country, and with freedom there’s huge opportunity for the talented to earn enormous sums of money. Conservatives shouldn’t run from the basic truth that the more freedom there is, the more inequality there is. Amen to that. Rising inequality signals shrinking lifestyle inequality. The rich get that way by mass producing former luxuries. They’re where the money is, but once again, any attempt to tax them is to tax the middle. By definition.

That the news reported at the New York Times contradicts opinions expressed at the newspaper and by candidates it favors is a given. The news is that the rich power economic growth through their innovation, and through their subsequent investment of the fruits of their innovation. In that case, and if conservatives truly want growth, it’s time for them to focus on protecting the earnings of the rich rather than embracing false notions about how the rich can be taxed aggressively without such taxes harming everyone.

John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). His new book is titled They're Both Wrong: A Policy Guide for America's Frustrated Independent Thinkers. Other books by Tamny include The End of Work, about the exciting growth of jobs more and more of us love, Who Needs the Fed? and Popular Economics. He can be reached at jtamny@realclearmarkets.com.  

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