Democrats Want to Kill Boris’ Goat

A couple years ago, Thomas Sowell  recalled a Russian fable that aptly describes some Americans today.  In the fable, there are two poor peasants, named Ivan and Boris.  The two men are almost exactly alike – except that Boris has a goat and Ivan does not.

One day, Ivan finds a bottle and, when he cleans it off, a genie pops out.  The genie tells Ivan she could grant him just one wish but it could be for anything in the world.

Ivan said, “I wish Boris’ goat would die.”

Ivan’s foolishness is similar to the Democrats’ obsession with ending the tax cuts on the wealthy. 

Without congressional action, the Bush tax cuts will expire at the end of the year and Americans will face a higher tax rate on income, capital gains and dividends.  The logical response for Washington would be to make the tax cuts permanent.

Why?

Because the cuts in tax rates enabled an economic growth that actually led to more tax dollars flowing into the US Treasury.  In fact, income tax revenue increased each year between 2004 and 2008 – despite having lower rates of taxation!

It wasn’t an anomaly either.  The Kennedy and Reagan tax rate cuts similarly increased tax revenue.

And what about taxes on capital gains?

In 2003, the tax rate on capital gains was cut from 20% to 15%.  Did tax revenue from capital gains shrink?  No.  The tax revenue actually doubled in the years following the rate cut.  The nearby graph shows how capital gains tax revenue has increased even though the capital gains tax rate been slashed.

The U.S. has a deficit crisis.  It was $1.4 trillion in 2009 and is expected to be $1.3 trillion in 2010.

But it’s not because we haven’t collected enough tax revenue or because the Bush tax cuts “weren’t paid for” as so many Democrats like to claim.  The deficits have increased because of Washington’s spending spree.

Unfortunately, facts and data matter less than ideology.  Ignoring the economic reality of lower tax rates, the Democrats will try very hard over the next couple months to raise the tax rate on the wealthy.

It’s a common class warfare narrative that they believe will earn them votes from the ‘economically oppressed’.

Earlier this week, two academics from Harvard and Duke surveyed Americans about their thoughts on the income gap between the wealthy and poor.  The study’s authors point out that the top 20% of wealthy Americans own 85% of the wealth and the bottom 40% own near 0%.

According to their survey, what did they find that Americans want?

When we asked respondents to tell us what their ideal distribution of wealth was, things got even more interesting: Americans wanted the top 20% to own just over 30% of the wealth, and the bottom 40% to own about 25%. They still wanted the rich to be richer than the poor, but they wanted the disparity to be much less extreme.

The authors go on to point out how to give Americans what they want…

…to achieve the ideal spelled out by those surveyed, about 50% of the total wealth in the United States would have to be taken from the top 20% and distributed to the remaining 80%.

With a passing nod to the chaos that would be created by an ‘immediate redistribution’ of 50% of the nation’s wealth, the authors conclude:

…our results suggest that policies that increase inequality — those that favor the wealthy, say, or that place a greater burden on the poor — are unlikely to reflect the desires of Americans from across the political and economic spectrum. Rather, they seem to favor policies that involve taking from the rich and giving to the poor.

Income inequality is a reality of life and life is unfair.  What really matters is that we have income mobility and opportunities to climb the rungs of the economic ladder.

But the conclusion of these authors, and of Washington’s Democrats, is that it would be easier to just kill Boris’ goat.