Whenever I ask misguided Catholics about why they vote for Democrats when the party line is to support abortion "rights", invariably they respond with the same basic answer:
"Democrats care about the poor. Cutting taxes just makes the rich richer and we have an obligation for social justice."
Wonderful sentiments. And I used to believe that too. Too bad that it's just not true.
The Heritage Foundation published a list called "Ten Myths About the Bush Tax Cuts and the Facts". You can click the link to read the entire story, but I will just point out a coupleof significant excerpts below:
Myth #6: Raising tax rates is the best way to raise revenue.
Fact: Tax revenues correlate with economic growth, not tax rates.
Many of those who desire additional tax revenues regularly call on Congress to raise tax rates, but tax revenues are a function of two variables: tax rates and the tax base. The tax base typically moves in the opposite direction of the tax rate, partially negating the revenue impact of tax rate changes. Accordingly, Chart 4 shows little correlation between tax rates and tax revenues. Since 1952, the highest marginal income tax rate has dropped from 92 percent to 35 percent, and tax revenues have grown in inflation-adjusted terms while remaining constant as a per cent of GDP.
Chart 5 shows the nearly perfect correlation between GDP and tax revenues. Despite major fluc tuations in income tax rates, long-term tax revenues have grown at almost exactly the same rate as GDP, remaining between 17 percent and 20 percent of GDP for 46 of the past 50 years. Table 1 shows that the top marginal income tax rate topped 90 percent during the 1950s and that revenues averaged 17.2 percent of GDP. By the 1990s, the top marginal income tax rate averaged just 36 per cent, and tax revenues averaged 18.3 percent of GDP. Regardless of the tax rate, tax revenues have almost always come in at approximately 18 percent of GDP.[13]
Since revenues move with GDP, the common-sense way to increase tax revenues is to expand the GDP. This means that pro-growth policies such as low marginal tax rates (especially on work, savings, and investment), restrained federal spending, minimal regulation, and free trade would raise more tax revenues than would be raised by self-defeating tax increases. America cannot substantially increase tax revenue with policies that reduce national income.
Myth #10: The Bush tax cuts were tilted toward the rich.
Fact: The rich are now shouldering even more of the income tax burden.
Popular mythology also suggests that the 2001 and 2003 tax cuts shifted more of the tax burden toward the poor. While high-income households did save more in actual dollars than low-income households, they did so because low-income house holds pay so little in income taxes in the first place. The same 1 percent tax cut will save more dollars for a millionaire than it will for a middle-class worker simply because the millionaire paid more taxes before the tax cut.
In 2000, the top 60 percent of taxpayers paid 100 percent of all income taxes. The bottom 40 percent collectively paid no income taxes. Lawmakers writing the 2001 tax cuts faced quite a challenge in giving the bulk of the income tax savings to a population that was already paying no income taxes.
Rather than exclude these Americans, lawmakers used the tax code to subsidize them. (Some economists would say this made that group's col lective tax burden negative.)First, lawmakers low ered the initial tax brackets from 15 percent to 10 percent and then expanded the refundable child tax credit, which, along with the refundable earned income tax credit (EITC), reduced the typical low-income tax burden to well below zero. As a result, the U.S. Treasury now mails tax "refunds" to a large proportion of these Americans that exceed the amounts of tax that they actually paid. All in all, the number of tax filers with zero or negative income tax liability rose from 30 million to 40 million, or about 30 percent of all tax filers.[17] The remaining 70 percent of tax filers received lower income tax rates, lower investment taxes, and lower estate taxes from the 2001 legislation.
Consequently, from 2000 to 2004, the share of all individual income taxes paid by the bottom 40 per cent dropped from zero percent to –4 percent, mean ing that the average family in those quintiles received a subsidy from the IRS. (See Chart 6.) By contrast, the share paid by the top quintile of households (by income) increased from 81 percent to 85 percent.
Expanding the data to include all federal taxes, the share paid by the top quintile edged up from 66.6 percent in 2000 to 67.1 percent in 2004, while the bottom 40 percent's share dipped from 5.9 per cent to 5.4 percent. Clearly, the tax cuts have led to the rich shouldering more of the income tax burden and the poor shouldering less.[18]
The point of this post is not to canonize George Bush (who has disappointed me in many ways) but to point out that the Democratic Party has no slam-dunk solution to the problems of the poor. Indeed, many of their policies only serve to institutionalize poverty and keep people dependent on the government.
I once sat through a homily listening to a priest commenting on an upcoming election. He insisted that the Church could not take sides in politics, then went on to ask us rhetorical questions like, "Do I support a fair and just living wage? Do I support health care for all people? Do I have compassion for the poor?" Many of the poor saps in the congregation had no information to draw from to show them that forced increases in the minimum wage often force layoffs, or that the minimum wage is most commonly an entry level wage for young workers. No one pointed out to them how socialized medicine has failed miserably in the countries that employ it. No, it was just assumed that to take these positions would be a perfect fit for Catholic social justice and any other view was callous disregard for the poor. Catholics hear this codespeak for the Democratic Party from their priests at parishes all over the country as every election approaches.
Finally, a word about the rich. The average millionaire in America lives in a middle-class neighborhood and works full-time. The outlandish McMansions are often purchased by the nouveau-riche (usually liberals who want you to know how much they care about the poor). Taxing the rich to death and other punitive measures toward success do not improve the lives of the poor and only harm the country. Before you start demonizing the rich, ask yourself: How many poor people own businesses or run corporations that employ people?
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