If rich Americans and large corporations foot the bill, does a tax plan really cost “zero dollars” to the average American?
Recent comments suggest the Democratic Party believes this to be the case.
In promoting the forthcoming $3.5 trillion, 2,465-page “Build Back Better” bill, President Joe Biden, House Speaker Nancy Pelosi and other Washington Democrats have forwarded claims that the bill — because it is paid for by the wealthy and large corporations — comes at “zero” cost to Americans.
My Build Back Better Agenda costs zero dollars.
Instead of wasting money on tax breaks, loopholes, and tax evasion for big corporations and the wealthy, we can make a once-in-a-generation investment in working America.
And it adds zero dollars to the national debt.
— President Biden (@POTUS) September 26, 2021
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Implicit in this assumption is the idea that such economic disruptions are isolated, with no rippling effects on America’s free-market economy.
However, as many economists have pointed out time and time again, high tax rates on the rich often only serve as disincentives for growth. In other words, using taxes to punish the groups most responsible for economic investment and growth often leads to less of both.
Instead, high earners will choose to move their investments to other countries with lower taxes and fewer restrictions, countries that go on to receive the subsequent benefits that would have been reaped by their American counterpart.
In comments sent exclusively to The Western Journal, Walter E. Block — professor of Economics at Loyola University New Orleans and senior fellow at the Mises Institute — explained as much through the use of two examples.
“Bjorn Borg, a Swedish tennis champion of a generation ago, was faced with a marginal tax rate of 110%. This means if he earned $1 million in a tennis tournament, he would have had to pay $1.1 million in taxes. That is, he would LOSE $100,000 on the deal,” Block wrote. “He moved to Monaco.”
“Gerard Depardieu, a French actor, also faced punitive taxes. He moved to Russia.”
“The wealthy in the US need not move to another country, although many of them will. But they will spend a lot of time and effort on tax avoidance: reducing their tax bill legally. They will hire lots of very bright tax attorneys and economists to hide their earnings. This will reduce the GDP, because, in the absence of these punitive taxes, these people would have been creating goods and services which will not come into existence.”
A cap on the creation of goods and services then leads to a cap on the number of jobs created for middle- to low-income Americans.
An additional problem caused by taxing the rich excessively is “tax shifting,” Block explained.
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“Just because the tax is placed on a given firm or person, does not mean that entity pays the taxes. Rather, this depends upon the elasticity of demand for the goods and services. Biden is targeting the rich, but all sort of people will end up paying the tax, not only his targets,” he wrote.
So, the “costs” of such taxes will be felt even by Americans who are not paying them directly.
This appears to be part of an already evident pattern of behavior repeatedly exhibited by the Biden administration.
Despite often touting its refusal to raise direct taxes on the average American, experts agree — many of the administration’s policies come with trade-offs that cost Americans as much or more anyway.
For example, the administration’s high level of spending has resulted in a massive spike in inflation — a phenomenon which American economist Milton Friedman famously described as “taxation without representation.”
The effects of inflation can be seen in drastic rising prices that outpace similar spikes in wages, resulting in the average American’s savings becoming less and less valuable over time.
Republican Rep. Steve Scalise of Louisiana recently warned that tacking the $3.5 trillion bill on top of the already skyrocketing rate of inflation will only serve to make life worse for everyday Americans.
“President Biden’s agenda has dramatically increased inflation, and they’re trying to pour gasoline on that fire,” Scalise said, according to Fox Business.
“[Democrats are] seeing how families have tied the increase in spending in Washington to higher inflation, and if you add trillions in new spending as well as trillions in new taxes, you’re only going to make inflation worse.”