Obama vs History: Taxing the Rich

If, as Sam Johnson and Bob Dylan maintain, “patriotism is the last refuge to which a scoundrel clings,” then taxing the rich is the first option of a faltering politician.  It doesn’t take a lot of planning; it’s easy to sound byte, and it makes good copy.  Journalist love tax stories because, since nobody likes taxes, they don’t need to waste a lot of time explaining economics to the iGeneration.  It’s either “tax breaks for wealthy friends [cronies in Canada]” or “making the rich pay their fair share.”  All journalists have to do is point to who’s getting screwed and go back to their Blackberries.  They don’t even have to look up.

When a faltering politician pulls the tax-the-rich rabbit out of his hat, he knows his days are numbered and he needs a ballot box bounce at the next election.  So when President Obama cranked up the teleprompter today, he wasn`t offering a bold strategy for economic recovery; he was starting his 2012 election campaign.

Actually, taxing the rich has a long and noble history.  It goes back to the days when Robin Hood and Maid Marian were playing Bonnie and Clyde with King John`s tax money.  In actual fact, though, Robin and his boys were a minor annoyance to King John; it was the rich northern barons who were the real problem.  John had been “making the [Saxon] rich pay their fair share” for years to cover the costs of his stupid wars.  Eventually, they got fed up with it.  In 1215, they raised an army, marched on London and finally cornered the King at a place called Runnymede.  Faced with involuntary abdication, King John signed the Magna Carta, a document that strictly limited the power of the monarchy.  The Divine Right of Kings was dead, western democracy was born and everybody (except John) went home happy,.  The Robin Hood story came centuries later and never really clarified just which rich Robin had been robbing.  Apparently, historically, taxing the rich has its disadvantages.

In the late 18^th century, another British King, George III, was busy “making the [American] rich pay their fair share” to cover the cost of his stupid wars — and along the way maybe pay for their own defence.  This did not sit well with the local moneyed class of The Thirteen Colonies.  They got together in Philadelphia and decided to limit the power of the British king and the British Parliament — by getting rid of them.  On July 4^th, 1776, they signed the Declaration of Independence, everybody went home to get their muskets, and the United States of America was born.  Meanwhile, George was left wondering if it was better to have taxed and lost than never to have taxed at all.

The modern version of “making the rich pay their fair share” first showed up in Britain, in 1909, when two wily Liberal politicians looked over to the left and saw the new Labour Party capturing the hearts and minds of British voters.  David Lloyd George and Winston Churchill decided it was time to redistribute the wealth of the Empire — and perhaps take a few votes away from the burgeoning socialist movement.  They concocted a People’s Budget which proposed an escalating Income tax, an Inheritance tax and a Land tax.  After a couple of years of political bickering and compromise, the budget passed.  Lloyd George described it thusly:

“This is a war Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away, we shall have advanced a great step towards that good time, when poverty, and the wretchedness and human degradation which always follows in its camp, will be as remote to the people of this country as the wolves which once infested its forests.”

Unfortunately, their scheme didn’t work.  Despite Lloyd George’s optimistic oratory, taxing the rich didn’t lift the poor out of poverty within that generation or even the next one.  It would take two World Wars and a worldwide Depression to eradicate the worst poverty from the slums of Great Britain, and even then not completely.  The only real result of the Liberal Party’s People’s Budget was within a generation the Liberal Party itself was wiped off the political map and is now “…as remote to the people of [Britain] as the wolves which once infested its
forests.”

Today, President Obama is playing a losing game with history by introducing the Buffett Tax on millionaires.  He might get away with it for a while because most ordinary people truly believe that the rich aren’t really “paying their fair share.”  It’s a common myth that no amount of reasonable arguments have ever been able to dislodge.  Let me bore you with some numbers, though; these are figures from the American Treasury Department.  In 2005, the top 50% of American taxpayers paid approximately 94% of all taxes collected, while the bottom 50% paid the rest – a mere 6%.  Obama knows that politicking with these numbers is not very smart.  However, “making the rich pay their fair share” is a far more palatable catchphrase.  It’s probably the first sound byte of the 2012 presidential campaign.

Luckily, the minute Obama opened his mouth, this morning history was on our side.  Despite its tempting appearance, taxing the rich has never been the best political strategy for staying around the halls of power — especially not in the long term.

It’s starting to look like the White House might get a new tenant next year.