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3 Right-Wing Lies About Rich People and Taxes -- Debunked

Conservative media outlets have pushed a number of myths to suggest that a large number of Americans will be negatively affected by a tax increase on the wealthy.

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A cut in spending is the economic equivalent of a cut in taxes now, or later. This point is effectively conceded by Mr. Obama demanding that his spending and borrowing binge of the past four years must be paid for by a giant increase in taxes over the next decade.

Some liberals acknowledge these fiscal facts of life but argue that tax revenues from the wealthy increased simply because the rich got richer. And so they did. But the economic growth that was touched off by lower tax rates, particularly in the 1960s and 1980s, also benefited middle-class incomes and living standards. If Mr. Obama has his way and raises tax rates on upper-income groups, it will slow the economy, and everyone will lose. [The Wall Street Journal,  11/15/2012]

Art Laffer: Obama Tax Rate Hike Will Stifle Economic Growth. In an interview with guest host Stuart Varney on Your World with Neil Cavuto, former Reagan adviser Art Laffer claimed that Obama's plan to increase tax rates for wealthy Americans would hurt job creators, and thus stalls economic growth. From the November 19 edition:

LAFFER: Job creators are basically upper income people. They're the people who decide how much they're going to employ and where they're going to employ them and all of that. If you raise tax rates on that, on those people, it makes them less enthusiastic to employ people, to create jobs, to create output, to create employment. You can't love jobs, Stuart, and hate job creators. And that is exactly what this administration has been trying to do for a long time. [Fox News, Your World with Neil Cavuto,  11/19/2012]

REALITY: Tax Cuts To Wealthy Have Encouraged Inequality

Krugman: Tax Policy "Leaned Into" Growing Inequality. In a September 2011 op-ed in The New York Times, Nobel Prize winning economist Paul Krugman explained that cutting taxes on the wealthy has not helped decrease inequality, and potentially helped increase it. From The New York Times:

Changes in tax rates have strongly favored the very, very rich.

Now, they're only a fairly small part of the huge growth in the after-tax inequality of income. But tax policy has very much leaned into that growing inequality, not against it -- and anyone who says otherwise should not be trusted on this issue, or any other. [The New York Times, 9/20/2011]

Center For American Progress: Tax Code Changes From 1979 To 2007 Did Not Reduce Income Inequality. In an April 2012 analysis of the effect of changes in the federal tax code on income inequality, the Center for American Progress found that decreases in effective tax rates paid by the wealthy over the past four decades failed to achieve the federal tax code's goal of reducing inequality. From the report:

From 1979 to 2007 there were a number of major tax changes, but the cumulative effect was to render the federal tax code less progressive and therefore less able to dampen income inequality. By one measure of inequality, the federal tax code in 2007 was about one-third less effective at reducing income inequality than it had been in 1979.


But even as inequality has risen, the federal system has become less progressive and therefore less able to reduce that inequality. In 1979 the richest 1 percent of Americans paid 37 percent of their income in federal taxes. Nearly 30 years and numerous tax cuts later, the effective tax rate for the richest 1 percent of American households was down under 30 percent. As the amount of taxes paid by the super-rich fell and then temporarily rose, and then fell again, so too did the overall impact of the tax code on the post-tax distribution of income. By 2007 the federal tax system's impact on income inequality was at a 15-year low. [Center for American Progress,  4/19/2012, emphasis added]

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