Biden’s tax plan is a bad new deal
“Since this is an era when many people are concerned about ‘fairness’ and ‘social justice,’ what is your ‘fair share’ of what someone else has worked for?”
– Thomas Sowell
America is the only nation that was formed on the backs of a tax revolt; yet the one promise that resonates with voters is the progressives’ pledge to “tax the rich.” Increasing taxes on the rich is the first thing proposed during any liberal’s stump speech and the last thing promised before the polls close on Election Eve. Liberals justify this as a means to an end; to pay down debit, and give them more money to spend on social and welfare programs for the poor and the under-classes.
But the flaw in this logic is higher rates don’t result in an increase in tax revenues since changes in rates alter behavior. Most all businesses and taxpayers will do whatever it takes to minimize their tax burden. Politicians view tax increases in real time, at the present rate of production and spending, and with no regard for the future. They never factor in the new “tax avoidance” strategies and “loopholes” taxpayers rediscover. And all politicians overlook the real net revenue gain and revenue lost.
Today’s progressive socialists have engaged in a romance with FDR’s New Deal. And they have taken a page out of his playbook to double down on his efforts since they now control government.
President Joe Biden ran on a platform to “tax the rich and put a chicken in every pot.” He pledged a “better deal” for America than Roosevelt dealt us. Biden preached dark days ahead for America if Donald Trump was reelected. The media anointed Biden the second coming of FDR with his “Build Back America Better” bad deal.
“If you elect me, your taxes are gonna be raised, not cut.”
– Joe Biden
It’s about time that Americans recall how Franklin Roosevelt financed his political spending spree. While English economist John Maynard Keynes was urging Roosevelt to embrace an aggressive program of debt-financed spending, FDR needed immediate cash. And his “quick fix” was through increased taxes.
All of FDR’s New Deal programs were financed by increasing taxes. He tripled federal taxes from $1.6 billion from the time he took office to $5.3 billion in 1940. He looked under every rock in D.C. for revenue. He increased the inheritance tax, excise taxes, and personal and corporate income taxes.
“When you come to the end of your rope, tie a knot and hang on.”
– Franklin D. Roosevelt
The biggest source of revenue to finance FDR’s spending came from those who could least afford it: average Americans. Excise taxes were levied on alcohol, tobacco, candy, gum, margarine, fruit juice, soft drinks, butter, telephone calls, bikes, matches, movie tickets, cards, electricity, radios, cars and tires. Almost every everyday commodity Americans used was subjected to excise taxes.
Henry Morgenthau, head of the Treasury Department, played a major role in designing Roosevelt’s tax swindle. He convinced FDR to raise the price of gold to inflate the currency so he could spend more. In one of FDR’s “Fireside Chats,” he admitted the “less affluent” were hurt most by the excise taxes. There is no question the New Deal was a bad deal for everyone, especially the middle class.
Because of FDR’s New Deal taxes, the Depression lingered on until the beginning of World War II. His taxes were a major job killer during the 1930s.
And unemployment rates averaged 17%. With the new Social Security tax on personal income and increased taxes on businesses, employers had less money for growth and did not create new jobs. With each New Deal program there was a new tax to pay for it and average Americans footed the bill.
“It is common sense to take a method and try it. If it fails, try another one.”
– Franklin D. Roosevelt
FDR’s New Deal tax rates took business capital away from the investment market, which killed job growth. He robbed Peter to pay Paul for dozens of new federal programs. When Paul ran out of money, he raised everyone’s taxes. And each new program produced unintended consequences.
It is conventional wisdom that people adjust their investment and spending in response to changes in tax rates, and the length of the Great Depression proved this. We learned FDR’s policy of taking tax dollars from one group and giving them to others politicizes a recovery. Yet today’s socialist progressives are using FDR’s failed New Deal formula to win elections, because people buy into it.
Everyone should run from Joe Biden‘s pledge not to increase individual taxes on anyone making less than $400,000. When he increases the top individual income rate from 37%, to 39.6%, among other increases, this will be a net gain of over $4 trillion in revenue over the next decade. And we must not forget the commitment he made to the socialist left to reinvent America with this revenue.
A high priority for progressives and socialists is to push the corporate rate up to 28% from 21%. The new left would jump for joy to see higher taxes on large corporations; and it would be a repeat performance of FDR’s botched economic policies. It would further entomb our weak economy and it would reduce U.S. productivity and wages. And Biden promised to double the minimum wage?
In 1994, under their Contract with America, Newt Gingrich and his Republican Congress reduced taxes, cut spending and reformed the welfare system. By 1997, unemployment dropped to 5.3% and Congress passed the Taxpayer Relief Act. A reluctant Bill Clinton ultimately signed it into law.
“I believe that the most important social welfare program in America is a job.”
– Newt Gingrich
When Trump took office in 2016, he implemented a program of tax cuts, spending increases and pressured the Fed to cut interest rates. His goal of 3% growth was derided as delusional by liberal media. Not only did the unemployment rate fall, but the percent of Americans employed saw its first sustained rise since the late 1980s. This inflection point changed the character of the labor market.
Aristotle told us, “We are what we repeatedly do. Excellence is a habit.” FDR’s wealth redistribution scheme is responsible for this “everyone should pay their fair share” attitude of the left. Yet nobody has determined what someone else’s fair share is? When you tax something, you get less of it. Is that fair or stupid? FDR proved that tax increases reduce buying power and hurt the labor market, which in turn ruins the economy. Biden’s reincarnation of the New Deal is a “raw deal” for America.
Biden ignores the successes of the Trump economy before the pandemic. The socialists might not like it, but if Biden is smart, he will continue Trump’s growth policies and trade initiatives. And it is crucial that he does not believe his own campaign rhetoric. Trump proved an aggressive growth strategy improves the fortunes of everyone in America. We do not need another “Bad Deal.”
“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson.”
This article was originally posted on Biden’s tax plan is a bad new deal