- - Thursday, March 21, 2019

ANALYSIS/OPINION:

Try explaining marginal tax cuts to a room of 5th graders.

Once, on Ronald Reagan’s birthday, I tried to explain what the top rate was like before our 40th president took office. “Imagine doing some chores for your grandparents,” I said, “and your grandma gives you $10. Then, when you get home, your parents take $7 from you. That’s what the tax rates were like before President Reagan took office.

The students immediately said that wasn’t fair.

Even 5th graders get it.

The last time the top tax rate was 70 percent was back in the days when President Jimmy Carter talked about a country in a malaise. Now, socialists like Rep. Alexandria Ocasio-Cortez (AOC) and Sen. Ed Markey want to bring that top tax rate back as part of the so-called “Green New Deal.”



AOC’s response when I tweeted about the fact that even 5th graders realized that wasn’t fair was to suggest that only a limited number of people would pay the tax. It reminded me of when former British Prime Minister Margaret Thatcher said, “the problem with socialism is that you eventually run out of other people’s money” to spend.

Politicians in Maryland helped make that point years ago when they passed a “millionaire tax” presumably to soak the “rich.” Apparently, the targeted taxpayers decided to flee and revenue projections were not met. Eventually, the governor proposed a new tax on households making $100,000 or more.

Think about that: The income of a fire fighter and a nurse could easily exceed $100,000 (particularly on the East Coast). Hardly wealthy. Uncontrolled spending in Maryland eventually hurt the middle class. Sooner or later they ran out of other people’s money to spend.

History is full of examples like that.

Remember the federal budget deal in 1990 that increased taxes on “luxury” items?

So who got hurt by the tax? According to a Wall Street Journal editorial, “Yacht retailers reported a 77 percent drop in sales that year, while boat builders estimated layoffs at 25,000.” All of the fuss about sticking it to the rich really just ended up hurting the thousands of middle-class workers and their families who got pink slips.

The taxes also took in $97 million less than had been projected for the first year. Consumers were buying fewer of the “luxury” items — or at least not buying them in America. In effect, the socialist dream of taking from the wealthy ended up hurting sales, which lead to massive layoffs and revenue projections that missed the mark.

Conversely, tax reductions have consistently had a positive impact on the economy.

Tax rates were cut several times during President Reagan’s tenure and America enjoyed many years of economic recovery. Plus, revenues continued to go up.

Revenues also continued to grow under the tax cuts proposed by President John F. Kennedy in the 1960s and during and around the Coolidge era in the 1920s. Liberals and many in the media (sometimes hard to discern which is which) mistakenly believe that lower taxes produce a reduction in revenues. History suggests otherwise.

But taxes are about more than just fiscal and economic policy. They are really about freedom.

Take Sen. Elizabeth Warren’s Wealth Tax, for example. It’s not enough to just raise taxes on income, now they want to tax your savings, too.

To me, that is like telling a straight “A” student that she must share her grades with the other students. Rightly so, she would say this is not fair.

Instead of stealing from her, why not help each of the other students do better?

As President Reagan said, “the weakness in this country for too many years has been our insistence of carving an ever-increasing number of slices from a shrinking economic pie. Our policies have concentrated on rationing scarcity rather than creating plenty.”

Instead of fighting over who gets the last piece of shrinking economic pie, let’s help the people of our country produce a bigger pie so that everyone will have a chance to live a better life. That is a uniquely American idea.

We are blessed to live in the land of equal opportunity, but the outcome is still up to each of us. True freedom and prosperity do not come from the clumsy hand of the government. They come from people being able to control their own life and their own destiny through the dignity that is born of work.

As policy makers consider tax increases or tax cuts, I hope they will remember these simple facts. Lest they forget we celebrate the 4th of July and not April 15th, because, in America, we celebrate our independence from the government and not our dependence on it.

• Scott Walker was the 45th governor of Wisconsin. You can contact him at [email protected] or follow him @ScottWalker.

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