Pritchett Politics: why “down with the rich” means down with America (Opinion)

Reforming the country’s tax system would not be as effective as many assume

Welcome to Pritchett Politics, where guest writer Wren Pritchett (’23) clarifies and simplifies current political issues before giving his personal opinion on the issue at-hand. In the spirit of teaching that controversial topics can be discussed civilly and openly, feel free to contact him with any questions, comments, or rebuttals.

Keep in mind all column opinions are reflective of the writer individually, not of The Mav Student News as a whole or as an editorial staff.

Too often in American society, the sentiment of “eat the rich” or “down with the rich” is thrown around, categorizing the richest in our society as proprietors of evil who need to be knocked off their pedestal. This largely liberal idea that the rich aren’t paying their fair share and need to be taxed more progressively takes many forms, with it even becoming a fashion trend in recent years. All these messages find common ground in being severely misguided and tiresome. 

Before discussing why this is, let’s start with what the tax system actually looks like in the U.S., a topic severely missed in the public school system. Taxes may be intricate, but they can be boiled down into simple categories.

First, there are the three basic types of tax: a tax on what you buy (sales tax), a tax on what you earn (income tax and capital gains tax), and a tax on what you own (property taxes). When discussing the rich and their “fair share” the tax being argued is on what they earn, or their income. You may be shocked to learn that the United States system of income tax is progressive, meaning the tax rate increases as income increases. The two other categories of tax rates are flat (also known as proportional), where the tax rate stays the same regardless of income (like a sales tax), and regressive, where tax rate decreases as income increases.

To many, a progressive tax system seems the most fair to a society, and the U.S. obliges in regards to their income tax. This is where the problem lies.

Income taxes are already progressive in America, but the majority of liberals are insistent that taxes be more progressive, more hefty, and decimate the upper class in the name of “equity”. Consider that the top 1% of earners in 2020 paid 42.3% of all federal income taxes, while the bottom 50% paid only 2.3% of these taxes. The top 1% paid an average tax rate of 26%, the bottom 50% a mere 3.1%. Does the tax rate hurt the pockets of the rich less than the poor? Yes, but at what point do we as a society realize that the cause of this is not an unfair tax code, but the fact the rich more often know how to make smart investments, and they have the assets to quickly accumulate wealth while the poor may not?

I agree that this is unfair, but no tax reform will fix the issue unless we unleash a tax hellscape which eliminates even the possibility of wealth. This objective, which goes hand in hand with “down with the rich” people, is simply anti-American, not pro-equity. It eliminates the possibility of the American dream.

“But we don’t need the super rich, that’s anti-American”. Consider the value that these individuals contribute to the economy. Consumer spending accounts for nearly 70% of the United States’ GDP. The top 20% of earners in the U.S. contribute nearly 40% of this spending. The bottom 20% only contributes about 9% of this spending. For better or worse, the “super rich” carry the economy through both their discretionary (nonessential) and investment spending. Slashing their wealth in the manner some tax proposals do — especially in a period of time where the U.S. battles inflation and the prospect of recession — simply slashes the performance of the economy.

History agrees with this idea. The Great Recession was fueled by the wealthiest in the country slashing their spending in the 1930s. The recession ended after the rich returned to traditional spending habits.

The housing and financial crisis of 2008 followed the same pattern.

If we heft taxes on the rich, a similar economic trend of crisis is sure to follow.

Recently, President Biden proposed a flat 20% tax on households with a net worth over 100 million dollars. As we’ve covered, while this would raise tax revenue and could address income inequality somewhat, it comes at the expense of the entire U.S. economy. It pushes the wealthy and their spending out of the country. The wealthy who do stay see their income crippled, and with it the economy. Job loss, economic downturn, and the transfer of wealth to other countries occurs.

Another common proposal from Democrats is a flat yearly tax on all wealth at 2 or 3%, proposed by Senator Elizabeth Warren in 2021. No commentary is necessary on this proposal, all we have to do is look at Europe. Many European countries (namely France) implemented the same style of tax at lower rates, and saw the economic consequences of their actions. France experienced the loss of 60,000 millionaires due to the tax. French economists estimate it cost the French government more than the revenue the tax generated, contributing to a reduction in GDP of 0.2 percent annually in the nearly 30 years it was in place.

Is this the economic future we envision for this country? It’s one I can’t get on board with. As unfair as taxes may seem now, we need to leave the tax system as is. It’s the best option we have.