12 Myths About Taxing the Rich | Robert Reich

Summary

This script debunks 12 common myths about taxing the wealthy, clarifying that higher tax rates apply only to income or wealth beyond certain thresholds. It highlights historical tax rates, public support for such measures, and refutes claims that wealth taxes are unconstitutional or detrimental to economic growth. The script argues that taxing the rich fairly can generate significant revenue, reduce inequality, and protect democracy, challenging the notion that the rich have earned their wealth independently of societal support.

Takeaways

• 📊 The script debunks 12 common myths about taxing the rich, highlighting misconceptions and providing factual counterpoints.
• 💼 A top marginal tax rate only applies to income or wealth exceeding specific thresholds, not the total amount.
• 🗳️ Public opinion supports higher taxes on the wealthy, with 70% of Americans in favor, including a majority of Republicans.
• 📉 Historically, higher top marginal tax rates were common in the U.S., with rates exceeding 90% in the 1950s and 60s.
• 🏦 The script argues that wealth taxes are not unconstitutional, drawing parallels to existing property taxes.
• 📈 Contrary to popular belief, there is no evidence that higher taxes on the rich slow economic growth; in fact, the opposite may be true.
• 💼 After tax cuts for corporations, job creation did not increase, and tax savings were often used for stock buybacks, benefiting executives and investors.
• 💰 The argument that the rich pay more than their fair share is misleading, as it overlooks the regressive nature of other taxes.
• 🔄 Wealthy families often avoid capital gains taxes through inheritance and the non-taxation of unrealized gains.
• 🏠 The estate tax, often criticized as a 'death tax,' only affects a small fraction of the wealthiest families.
• 🚫 While some argue that the wealthy will evade higher taxes, research suggests that significant revenue can still be raised, such as through a 2% wealth tax.
• 🌐 The purpose of raising taxes on the wealthy is not solely for revenue but also to address inequality and protect democracy.
• 🤔 The script challenges the notion that the rich have 'earned' their wealth entirely on their own, emphasizing the role of societal and governmental support.

Q & A

What is the misconception about a top marginal tax rate according to the script?

The misconception is that a top marginal tax rate applies to all of a rich person's total income or wealth. In reality, it only applies to income or wealth in excess of a certain threshold, such as the 70% income tax rate proposed for income over 10 million dollars a year.

Is raising taxes on the rich considered a far-left idea according to the script?

No, raising taxes on the rich is not a far-left idea. The script states that 70% of Americans, including 54% of Republicans, support raising taxes on families making more than 10 million dollars a year.

What historical tax rates are mentioned in the script for the period between 1930 to 1980?

The script mentions that from 1930 to 1980, the average top marginal income tax rate was 78 percent, and from 1951 to 1963, it exceeded 90 percent.

Is the wealth tax unconstitutional as suggested by some myths?

No, the script refutes this myth by stating that the Constitution gives Congress the power to lay and collect taxes, and that many locales already impose an annual wealth tax in the form of property taxes.

What is the script's stance on the belief that cutting taxes on the rich leads to more investment and benefits for everyone?

The script strongly disagrees with this belief, stating that it is 'utter baloney' and that there is no evidence that higher taxes on the rich slow economic growth. In fact, it suggests that economic growth has been higher when top marginal tax rates were higher.

What happened after the corporate tax rate was lowered in 2018 according to the script?

The script states that after the corporate tax rate was lowered in 2018, America's largest corporations cut more jobs than they created and used their tax savings largely to increase their stock prices by buying back their own shares, benefiting executives and wealthy investors but not the economy.

Why is the claim that the rich already pay more than their fair share in taxes considered misleading in the script?

The claim is misleading because it focuses only on income taxes and ignores other taxes such as payroll taxes, state and local sales taxes, and property taxes, which disproportionately affect lower-income families.

How does the script address the myth about the estate tax being a death tax that hits millions of Americans?

The script refutes this myth by explaining that the current estate tax only applies to assets in excess of 11 million dollars for individuals or 22 million dollars for couples, affecting fewer than 2,000 families.

What would be the potential revenue from a 2% wealth tax as mentioned in the script?

The script suggests that a 2% wealth tax, as proposed by Senator Elizabeth Warren, would raise around 2.75 trillion dollars over the next decade with very little tax evasion.

What are the two main reasons for raising taxes on the wealthy according to the script?

The script identifies two main reasons: to generate revenue to reduce the national debt and invest in public services, and to reduce inequality to safeguard democracy against oligarchy.

Why does the script argue that it's unfair not to raise taxes on the rich?

The script argues that it's unfair not to raise taxes on the rich because most Americans have seen no income growth in the last 40 years while the incomes of the wealthy have skyrocketed, and more than 60% of wealth in America is now inherited.

How does the script respond to the argument that the rich have earned their money and it's their money?

The script rejects this argument by stating that the rich could not maintain their fortunes without the infrastructure, education, and other services provided by America, and that they have benefited from various forms of government support and subsidies.

Outlines

00:00

💼 Myths About Taxing the Rich: Dispelling Misconceptions

This paragraph addresses common misconceptions about taxing the wealthy. It clarifies that a top marginal tax rate, such as the 70% proposed by Alexandria Ocasio-Cortez, only applies to income exceeding $10 million annually. Similarly, Elizabeth Warren's 2% wealth tax targets wealth beyond $50 million. The paragraph refutes the idea that this is a far-left concept, as a majority of Americans, including Republicans, support it. Historically, top marginal rates were much higher, and the rich paid a significant portion of their income in taxes. The paragraph also dismisses the notion that a wealth tax is unconstitutional, comparing it to property taxes already in place. It argues against the trickle-down economics theory, showing that economic growth was higher during periods of higher top tax rates. The paragraph also counters the belief that corporations reinvest tax savings, stating that they often use these funds for stock buybacks, benefiting executives and wealthy investors rather than the economy. It highlights that the rich do not pay a disproportionate amount in taxes when considering all forms of taxation and that capital gains taxes are often avoided through wealth inheritance.

05:09

🏦 Addressing Wealth Inequality and the Role of Taxation

The second paragraph delves into the specifics of wealth inequality and the role of taxation in addressing it. It dispels the myth that the estate tax affects a large number of Americans, noting that it only applies to assets exceeding $11 million for individuals or $22 million for couples, impacting a very small fraction of the population. The paragraph also counters the belief that the wealthy will evade higher taxes, citing research that suggests a 2% wealth tax could raise substantial revenue with minimal evasion. It emphasizes that raising taxes on the wealthy is not solely for revenue collection but also to reduce inequality and protect democracy from oligarchy. The paragraph challenges the notion of fairness in taxation, arguing that not raising taxes on the rich is unfair given the stagnation of incomes for most Americans while the rich have seen significant income growth. It points out the inherited nature of wealth and the advantages provided by society to the rich, such as education and infrastructure, and the role of government interventions like bailouts and subsidies in their success. The paragraph concludes by inviting viewers to reflect on the myths they have heard about taxes and to engage with the content through comments and further viewing.

Keywords

💡Marginal Tax Rate

The marginal tax rate is the percentage of income that is taxed at the highest rate applicable to an individual's income level. In the video, it is mentioned that a 70 percent marginal tax rate proposed by Congresswoman Alexandria Ocasio-Cortez would only apply to income exceeding 10 million dollars a year, illustrating the progressive nature of taxation where only portions of income are taxed at higher rates.

💡Wealth Tax

A wealth tax is a levy on the total value of personal assets, including stocks, bonds, and property, minus liabilities. The script refers to a 2 percent wealth tax proposed by Elizabeth Warren, which would only apply to wealth in excess of 50 million dollars, highlighting an effort to tax the accumulated wealth of the richest individuals.

💡Trickle-Down Economics

Trickle-down economics is the theory that tax cuts for the wealthy will benefit the economy as a whole by encouraging investment and job creation. The video refutes this idea, stating that tax cuts for the rich under Trump, Bush, and Reagan did not result in widespread benefits, and instead, the rich often used their savings to inflate stock prices rather than investing in job creation.

💡Tax Evasion

Tax evasion refers to the illegal practice of avoiding or reducing tax liability through deceit or non-compliance. The video dispels the myth that raising taxes on the wealthy would lead to significant tax evasion, suggesting that substantial revenue could still be raised through measures like a 2 percent wealth tax.

💡Estate Tax

The estate tax is a tax on the transfer of property after death. The script clarifies that the estate tax, which only applies to large inheritances, is often mischaracterized as a 'death tax' but actually affects a very small number of wealthy estates, emphasizing the targeted nature of this tax.

💡Capital Gains Tax

Capital gains tax is levied on the profit made from selling an asset that has increased in value. The video points out that wealthy families often avoid capital gains taxes by passing on wealth to heirs, allowing large, untaxed capital gains to be transferred between generations.

💡Tax Burden

Tax burden refers to the total amount of taxes paid by an individual or group. The script argues that focusing solely on income taxes misleads the public about who pays more, as lower-income individuals often bear a larger tax burden when considering payroll, sales, and property taxes.

💡Economic Growth

Economic growth is the increase in the production of goods and services in an economy over time. The video challenges the notion that higher taxes on the rich slow economic growth, citing historical data showing that periods with high top marginal tax rates were associated with higher average growth rates.

💡Tax Fairness

Tax fairness is the concept that the tax system should distribute the tax burden equitably among different income levels. The script discusses the idea that the rich already pay more than their fair share as misleading, arguing for a more equitable distribution of the tax burden.

💡Inequality

Inequality refers to the unequal distribution of resources, wealth, or income within a population. The video suggests that raising taxes on the wealthy is not only about revenue collection but also about reducing economic inequality and protecting democracy from oligarchic influence.

💡Revenue

Revenue in the context of taxation refers to the income collected by the government through various taxes. The script highlights that proposals to raise taxes on the wealthy would generate significant revenue, which could be used to reduce the national debt and fund public services.

💡Tax Myths

Tax myths are misconceptions or false beliefs about taxation. The video debunks several myths, such as the belief that the rich already pay enough or that higher taxes on the rich would harm economic growth, aiming to provide a clearer understanding of the tax system and its effects.

Highlights

Some politicians propose higher taxes on the rich, facing opposition from the wealthy.

Myth debunked: A top marginal tax rate only applies to income exceeding a certain threshold.

The 70% income tax rate proposed by Ocasio-Cortez targets income over $10 million annually.

Elizabeth Warren's 2% wealth tax applies to wealth exceeding $50 million.

Raising taxes on the rich is supported by 70% of Americans, including 54% of Republicans.

Historically, top marginal income tax rates were as high as 90% from 1951 to 1963.

A wealth tax is not unconstitutional; property tax is an example of an annual wealth tax.

Trickle-down economics has not benefited the broader population despite tax cuts for the rich.

Higher top marginal tax rates have historically correlated with higher economic growth.

Corporate tax cuts have not led to increased jobs; instead, stock buybacks enriched executives.

The claim that the rich pay more than their fair share in taxes is misleading.

Rich families often avoid capital gains taxes by passing wealth to heirs without taxation.

The estate tax, affecting only large estates, hits very few American families.

Tax evasion by the wealthy is not as significant as claimed; substantial revenue can be raised.

Taxing the wealthy is not solely for revenue; it aims to reduce inequality and safeguard democracy.

The argument that it's unfair to raise taxes on the wealthy is countered by the rapid income growth of the top earners.

Wealth accumulation by the rich is not solely earned but also得益于America's infrastructure and support systems.

Transcripts

Some politicians are calling for higher taxes on the rich. And naturally, these proposals

have unleashed a torrent of opposition – mostly from…

the rich.

Here are the 12 biggest myths they are propounding.

Myth:

A top marginal tax rate applies to all of a rich person’s total income or wealth.

Wrong.

It would only apply to dollars in excess of a certain level. The 70 percent income

tax rate proposed by Congresswoman Alexandria Ocasio-Cortez would apply only to dollars

in excess of 10 million dollars a year.

The 2 percent wealth tax proposed by Elizabeth

Warren would apply only to wealth in excess of 50 million dollars.

Myth:

Raising taxes on the rich is a far-left idea.

Baloney.

70 percent of Americans -- including 54 percent of Republicans -- support raising

taxes on families making more than 10 million dollars a year. And expecting the rich to

pay their fair share is a traditional American idea. From 1930 to 1980, the average top marginal

income tax rate was 78 percent. From 1951 to 1963 it exceeded 90 percent -- again, only

on dollars in excess of a very high threshold.

Even considering all deductions and tax credits,

the very rich paid over half of their top incomes in taxes.

Myth:

A wealth tax is unconstitutional.

Rubbish.

Most locales already impose an annual wealth tax on the value of peoples’ homes

-- the main source of household wealth for most people. It’s called the property tax.

The rich hold most of their wealth in stocks and bonds, so why should these forms of wealth

escape taxation? Article I Section 8 of the Constitution gives “Congress [the] power

to lay and collect taxes.”

Myth:

When taxes on the rich are cut, they invest more and everyone benefits, when taxes

on the rich are increased, economic growth slows.

Utter baloney.

Trickle-down economics is a cruel joke. Donald Trump, George W. Bush,

and Ronald Reagan all cut taxes on the rich, and nothing trickled down. There’s no evidence

that higher taxes on the rich slows economic growth. To the contrary, when the top marginal

tax rate has been high -- between 71 to 92 percent -- growth has averaged 4 percent a year.

But when top rate has been low -- between 28 and 39 percent -- growth has averaged only

2.1 percent.

Myth:

When you cut taxes on corporations, they invest more, and create more jobs.

Wrong again.

After Trump and the Republicans lowered the corporate tax rate in 2018, America’s

largest corporations cut more jobs than they created. They used their tax savings largely

to increase their stock prices by buying back their own shares of stock -- enriching executives

and wealthy investors but providing no real benefit to the economy.

Myth:

The rich already pay more than their fair share in taxes.

This is misleading,

because it focuses only on income taxes -- leaving out the large and

growing tax burden on lower-income Americans; payroll taxes, state and local sales taxes,

and property taxes take bigger bites out of the pay of lower-income families than higher-income.

Myth:

The rich already pay capital gains taxes.

Misleading.

Rich families avoid paying capital gains taxes by passing their wealth on to

their heirs. In fact, the largest share of big estates transferred from generation to

generation are unrealized capital gains that have never been taxed.

Myth:

The estate tax is a death tax that hits millions of Americans.

Baloney.

The current estate tax, which only applies to assets in excess of 11 million

dollars, or 22 million dollars for couples, affects fewer than 2,000 families.

Myth:

If taxes are raised on the wealthy, they’ll find ways to evade them. So very

little money is going to be raised.

More rubbish.

For example, a 2 percent wealth tax, as proposed by Senator Elizabeth Warren,

would raise around 2.75 trillion dollars over the next decade with very little tax evasion,

according to research. A 70 percent tax on incomes over 10 million would raise close

to 720 billion dollars over 10 years.

Myth:

The only reason to raise taxes on the wealthy is to collect revenue.

No.

Although these proposals would generate lots of revenue – and help us reduce the

national debt while investing in schools, roads, and all the things we need – another

major purpose is to reduce inequality, and thereby safeguard democracy against oligarchy.

Myth:

It’s unfair to raise taxes on the wealthy.

Actually,

it’s unfair not to raise taxes on the rich.

For the last 40 years, most Americans

have seen no growth in their incomes at all, while the incomes of a minority at the top

have skyrocketed. We’re rapidly heading toward a society dominated

by a handful of super-rich, many of whom have never worked a day in their lives. More than

60 percent of wealth in America is now inherited.

Myth:

They earned it. It’s their money.

Hogwash.

It’s their country, too. They couldn't maintain their fortunes without what America

provides – national defense, police, laws, courts, political stability, and the Constitution.

They couldn’t have got where they are without other things America provides -- education,

infrastructure, and a nation that respects private property. And to argue it’s “their

money” also ignores a lot of other ways America has bestowed advantages on the rich

– everything from bailing out Wall Street bankers when they get into trouble, to subsidizing

the research of Big Pharma.

So the next time you hear one of these myths, know the truth.

What do you think? What myths have you heard about taxes? Let us know in the comments.

If you found this video informative, be sure to also watch our video on The Failure or

Trickledown Economics. And, as always, please subscribe to this channel for more videos

like this one.