It’s always easier to spend someone else’s money—and voters are often eager to believe politicians when they promise to do just that. That’s probably why Donald Trump’s promise to make Mexico pay for a border wall resonated with his base. Certainly, it’s why Democrats have stuck to class warfare talking points, telling voters a tax on Jeff Bezos will somehow pay for a European-style welfare state.
Indeed, politicians always seem to promise voters that their grand spending plans will be funded by taxes (or tariffs) on “someone else.” Democrat presidential hopefuls have been promoting a slew of “soak the rich” schemes to convince voters that free college, government run healthcare and even a Universal Basic Income is possible.
Of course, like Mexico paying for an American border wall, such a promise is political pandering—not economic reality.
To begin with, as it turns out, the super wealthy can afford some pretty good tax accountants. As a result, they rarely ever pay the rate that politicians advertise. Even if that wasn’t the case, however, such “tax the rich” policies simply don’t generate enough revenue to fund the kind of spending Democrat politicians are discussing.
Democrat presidential hopeful Bernie Sanders, for example, has long argued we should create a Denmark-style welfare state by simply taxing “millionaires and billionaires.” (Since becoming a millionaire himself, this has been shortened to simply “billionaires.”) However, Denmark isn’t the redistributionist utopia Sanders seems to think it is. In fact, if Denmark’s tax system was put in place in America, workers earning $60,000 per year would face a tax rate of 60 percent—not exactly what leaps to mind when you hear the word “billionaire.”
Perhaps understanding some of this, Democrat Presidential hopeful Elizabeth Warren has recently proposed taxing the overall wealth—not just income and capital—of billionaires like Amazon founder, Jeff Bezos. According to Warren, this could be far more lucrative for government coffers than a mere adjustment to the top marginal tax rate.
However, because wealth is directly related to growing and building businesses, Warren’s tax would essentially be a tax on all the activity that allows companies like Amazon to hire workers, lower prices for consumers and increase wages.
In other words, Warren’s tax might be aimed at Bezos, but it would be paid for—at least in part—by Amazon’s customers and employees. (Before embracing Warren’s plan, maybe we should ask some Amazon employees if becoming unemployed is a fair tradeoff for making sure Bezos’ net worth is knocked down a few billion dollars.)
Nonetheless, Warren and Sanders have both built quite a following by promoting this myth that their voters will somehow enjoy all the benefits of their programs with absolutely none of the cost.
And they’re not alone. We’ve seen this in spectacular fashion in Nevada, where—because we have no income tax—every tax hike is sold to us as a tax “on someone else.”
Sales taxes, business taxes and even the tax levied to fund the Raiders stadium, have all been sold to voters on this basis. And it’s true that most voters in Nevada aren’t the ones writing the checks to state coffers—but that doesn’t mean we aren’t shouldering the burden.
In the last legislative session, for example, Democrats passed a partisan (and unconstitutional) tax increase when they changed the law to eliminate a partial sunset of the Modified Business Tax (MBT) rate. Voters could be forgiven for believing the tax is paid for by “businesses.” After all, “business” is in the name. Besides, workers don’t see a line item deduction on their paycheck for the tax, nor do they receive some bill from Nevada government at the end of each pay period.
However, the MBT is a payroll tax—a tax that is directly tied to how much an employer decides to invest in its workforce. Now, thanks to the elimination of the sunset, businesses will continue to send money budgeted for personnel expenses to government coffers rather than into the paychecks of Nevada workers.
Whether the issue is a new top marginal tax rate, a wealth tax, or state government’s plan to hike business taxes, we’re always told “someone else” is going to pay.
Unfortunately, as it turns out, we’re all “someone else” to someone else.
Michael Schaus is Communications Director for Nevada Policy Research Institute