Expert-for-Sale-or-Lease Art Woolf has outdone himself in this week’s Burlington Free Press column. And that’s saying something, because just about every emission is a small shining jewel of cherrypicked statistics and unexamined dogma.
This week’s, though, hoo boy.
Maybe he’s been reading this blog, because today’s column is a 300-word attack on the idea of taxing the rich. His argument relies on the unlikely, and irrelevant, assertion that rich folks’ incomes are too volatile to be a dependable source of tax revenue.
Which may be true for individual taxpayers, whose incomes shuttle between well-off, rich, and filthy stinkin’ rich depending on the stock market, the purchase or sale of costly assets, and the convenient laundering of wealth to screw the taxman. (Woolf doesn’t mention the many, many tax advantages of being wealthy, and how they might cause volatility in rich folks’ tax payments.)
Woolf spends most of his column puttering around the definition of “rich,” and showing (with carefully chosen numbers) that these folks pay an impressive share of our total income tax revenue.
Well, of course they do. They earn an even more impressive share of our total income.
Not to mention that while our income tax system is fairly progressive, our total tax system is not. Sales taxes hit hardest on the poor and working classes; property taxes hit the middle class. And the income tax isn’t as progressive as it should be. The rich may pay 40% of Vermont’s income tax revenue, but they sure as hell don’t pay 40% of our total (state and local) intake.
Now, if you look at statistics that Woolf conveniently ignores — total taxation as a percentage of income — you see that the rich pay lower effective tax rates than everybody else in Vermont. Here’s a chart from the Institute on Taxation and Economic Policy that I’ve posted before, but it’s relevant here:
Take all of our state and local taxation together, the richest Vermonters pay a smaller share than anybody else. Woolf conveniently ignores these figures. And he evades the obvious question they pose:
Did they pay their fair share? That’s a question a philosopher, not an economist, can answer.
Wrong, Perfesser. It doesn’t take a philosopher, or even an economist, to look at that chart and conclude that they don’t pay their fair share.
Woolf’s actual premise, that the state can’t depend on revenue from top earners, is irrelevant. Nobody is arguing for confiscatory taxation. Nobody is arguing that soaking the rich should be the foundation of our tax system. The real argument is fairness: are the rich paying enough? The answer, clearly, is no.
The revenue volatility is one of many serious problems caused by income inequality. The solution to the volatility is a fairer economy — one that doesn’t concentrate the wealth at the top end. A fairer economy would also be a stronger and more stable economy, since supply and demand would be in balance.
Why have our economy and our public finances struggled since the Great Recession? Because there are too many people who can’t afford to buy stuff, and consumer activity is by far our strongest economic driver. That’s why programs like food stamps and the Earned Income Tax Credit provide more economic stimulus than any corporate tax break or across-the-board tax cut: when working people get a little extra cash, they immediately fritter it away on things like food, housing, and heat.
But I digress. Woolf’s argument is misleading and intellectually dishonest. His conclusion is irrelevant to the actual public policy question in play. He also leaves us without a hint of an alternative solution to wealth inequality, unfair taxation, and an economy slumping due to a lack of consumer demand.