08/01/08 Woods Tea Company, Robin Hood and the Wealthy One Percent Of The Nation

Keeping the Rich rich, by raising their taxes

Manchester Journal

By Anthony Cupaiuolo

On August 13, Vermont's favorite home grown folk singers the Woods Tea Company will once again be performing in Manchester on the grounds of Hildene, the Lincoln family home. In all likelihood they will sing "Robin Hood," one of their signature songs, with the entire crowd enthusiastically singing along. A mythic heroic figure, Robin Hood has gained fame for "robbing from the rich and giving it to the poor." When liberals advocate higher taxes on the wealthy in order to provide needed services for the less fortunate, they may be accused of a Robin Hood approach to public policy. Given the current state of the American economy, however, it is becoming increasingly clear that unless the wealthy begin to pay more taxes their wealth may be at risk.

I recently received one of those ubiquitous obnoxious e-mails bashing liberals in general and Sen. Obama in particular for wanting to raise taxes on the wealthiest of Americans, those who earn more than $250,000 per year. The writer contended that this was unfair because the wealthy were already bearing a disproportionate share of the tax burden. On its face a true statement in that given a relatively progressive income tax, the more you earn the more you pay. But the writer conveniently omitted that we are at a time when the proportion of the nation's wealth held by the top one percent of Americans is at an all time high, the tax rate on the wealthy is down significantly from what it had been even a few decades ago, and the income of the majority of Americans has not kept pace with inflation.

Now you might expect me to make the logical argument that fairness demands that the rich pay more in taxes in order to redistribute wealth in a more equitable manner. While I believe that this is a strong and compelling moral position, I also think that there is a pragmatic reason to tax the rich more: because it is in their best financial interest, as counter-intuitive as this may seem. Recent history suggests that upper income households increase their incomes whether or not taxes are high or low as long as the economy is humming along. On the other hand the rest of us see incomes rise when the wealthy pay more in taxes and decrease when they pay less.

Concentration of wealth in a small percentage of the population inexorably leads to an economic downturn; it was a major contributor to the Great Depression. Our current recession was delayed because average Americans kept the economy ostensibly strong by spending beyond their means because they borrowed against the equity of their homes. With the bursting of the housing bubble, rising unemployment, and much higher fuel, food, and energy costs, average Americans can no longer bail out the economy.

In the early days of the 1988 presidential campaign I was asked to draft a policy statement on behalf of a major candidate seeking the Democratic Party nomination. Whether the candidate ever saw what I wrote is impossible to know, but I remember well that my paper targeted a three-pronged investment strategy: infrastructure, human resources, and the environment. Accordingly I found it of special interest to read in a recent New York Times article that Mark Zandi, chief economist at Moody's Economy.com concluded in a study earlier this year that increased infrastructure spending and aid to states would generate approximately four times as much economic growth as making the Bush tax cuts permanent, cutting business taxes, or allowing businesses to write off new investments more quickly. Ironically, although Zandi is an advisor to Sen. McCain, McCain sees retaining the Bush tax cuts as a cornerstone of his economic policy.

Another recent New York Times article told the sad tale of couple having to put their Greenwich, Connecticut mansion up for auction beginning at $19 million because their net worth had fallen by half from $100 million to a mere $50 million making it too difficult to maintain their home at the cost of $600,000 per year. In other words the rich also are facing economic hardship. If they want to avoid worse times, such as the fate of some of their Depression counterparts, selling apples and jumping out windows, they would be well-served by paying more taxes now so that the new President and Congress would have the revenue to invest not only in our physical infrastructure for sorely needed bridge and road repairs and improvements, but also in education, technology, renewable energy, and the environment. This is the formula needed to enhance productivity and stimulate the economy, and it will benefit the rich and all the rest of us.

So when you join in singing "Robin Hood" with the Woods Tea Company on August 13, that rousing song written by Burlington first graders, keep in mind that sometimes robbing from the rich is for their own darn good.

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