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WSJ Economist Moore: No Grounds for Obama's Tax on Wealthy

By    |   Tuesday, 09 October 2012 01:11 PM

Wall Street Journal economics expert Stephen Moore tells Newsmax that there is “no case on economic grounds” to heed President Barack Obama’s call for higher taxes on wealthier Americans.

He says raising those rates would simply encourage wealthier taxpayers to hide their money and wouldn’t boost revenues as predicted by “the anti-Clinton” — President Obama.

Watch the exclusive interview here.

And he warns that the expiration of the Bush-era tax cuts next year could cause a double-dip recession.

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Moore is a senior economics writer and editorial board member for The Wall Street Journal. He is the founder and former president of the Club for Growth and a best-selling author. He also wrote the cover story for Newsmax magazine’s October issue.

Moore’s new book is “Who's The Fairest of Them All: The Truth about Opportunity, Taxes and Wealth in America.”

In an exclusive interview with Newsmax TV, Moore was asked if Obama and the Democrats are advocating higher taxes on the wealthy to improve the economy or to win over middle-class voters.

“I don’t think anybody thinks that raising tax rates will improve the economy. At least I certainly hope no one does because the history is so unequivocal that that’s not the case,” Moore says.

“In fact, what you want is lower tax rates, not higher tax rates, especially when we’re living in a global economy where United States companies are competing against companies in India and China and Germany and France and all over the world.

“So there’s no case on economic grounds for raising tax rates. President Obama is selling that idea on the grounds of fairness and that’s really the reason I wrote this book, to sort of define what does it really mean to be a fair society.

“What I show in this research is that the fairest system of them all is the free enterprise system. The free enterprise system is what creates growth, creates jobs and higher living standards for almost all Americans. So it’s hard to improve on that system. President Obama believes that the way to create a fairer system is to redistribute income from the rich to the poor. That’s never worked very well.”

Americans are an “aspirational society” and don’t believe that rich people are evil, Moore adds.

“Most of us aspire to be rich and that’s really the American Dream — to try to work hard, start a business, do the right thing so you can get rich. And America’s still the best country in the world to do that, despite all the obstacles that government tries to create.

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“I think President Obama is driven much more by an ideology that says, ‘Redistribute wealth instead of creating.’ It’s almost like the wealth is just automatically there and all we have to do is just cut up that pie differently. What I show in the book is that when you try to do that, what happens is the pie shrinks and everybody is worse off.”

Vice President Joe Biden recently said the middle class has been “buried” during the last few years. But Moore argues that the demise of the middle class is a myth.

He comments: “First of all, let me say that the demise of the middle class over the last three years is very real. We have seen a very steep decline in middle income earnings over the last three and a half years. Since President Obama came into office, there’s been a $4,500 decline in income. That’s huge. That’s one month’s income.

“What I was talking about in the book is, over the last several decades, in the ‘80s, ‘90s and even the first of the 2000s, the middle class did very well. President Obama says, ‘Oh, the recent decades have been a time of decline in the middle class.’ That’s not true. The real decline of the middle class was George Bush’s last year in office and Barack Obama’s first three and a half years in office.”

Moore points out that the wealthiest 10 percent of Americans pay most of the taxes — 75 percent of income taxes and 45 percent of all taxes. Yet some argue that the richest Americans are still doing really well when compared to the other 90 percent and can afford to chip in a little more in taxes.

“Look, we do need more tax revenues if we want to balance this budget. There’s absolutely no question about it,” Moore says.

“Tax revenues as a percent of our GDP are lower than they’ve been in 40 years. My response to this argument about why not just soak the rich is that that’s never really worked very well. History proves if you want to get more revenues out of rich people, cut their tax rates, don’t raise them. That’s a lesson that John F. Kennedy taught us, Ronald Reagan taught us, even George W. Bush taught us.

“I don’t think there’s any evidence that raising tax rates way up is going to get more money out of the rich because the rich will find shelters, they will find tax carve-outs and loopholes and deductions to hide their money.”

Another argument from the left is that we should raise tax rates to where they were under President Clinton. President Obama has pointed out that those rates did not slow down economic growth during Clinton’s tenure.
Moore takes issue with that point of view.

“A couple of things,” he says. “One is that President Obama doesn’t want to just raise the rates to the Clinton era, he wants them to be a lot higher. People forget that also in the Obamacare healthcare law, there’s a 3.8 percent investment surtax so rates would actually go up about four percentage points higher than they were in the Clinton administration.

“But the other thing to point out is the Clinton years were prosperous, in part because under a Republican Congress and Bill Clinton, who was a conservative in terms of his fiscal policies, government spending fell as a share of GDP from 22 percent to 18 percent. So that’s like a tax cut when you cut government spending by four percentage points of GDP.

“Barack Obama’s done just the opposite. He’s raised gross spending by almost four percentage points of GDP. We’ve been averaging about 24 percent, which is the highest it’s been any time since World War II when we were fighting the Nazis and the Japanese.

“So the point I would make is that Barack Obama’s kind of the anti-Clinton. Obama’s not a fiscal conservative. He’s driven up the debt by over $1 trillion a year. Just last week, the numbers came out that we had a $1.1 trillion deficit in 2012. That’s four straight years with trillion-dollar deficits. That isn’t fiscal conservatism. That doesn’t help anybody.”

The Bush-era tax cuts are set to expire next year at the same time that automatic cuts in government spending are scheduled to take effect, possibly leading to what some have called a “fiscal cliff.” That makes this year’s election crucial, Moore asserts.

“The most important fiscal cliff is this tax increase, and the reason this is such an important election is if Barack Obama wins, he will have a mandate from voters to raise tax rates,” he tells Newsmax.

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“I agree with the Congressional Budget Office and a lot of other economists that that’s something that could cause a double dip recession. And if you think the economy’s bad now, wait until those tax rates go up in 2013.

“One of the arguments for Mitt Romney is he’s actually going to cut the rates, not raise them. I do think we need spending cuts. There’s a lot of people who say that we can’t afford to do these spending cuts next year. Yes, we can afford to do that.

“In fact, we have to do that. We have to start really taking a blade to government spending because that’s so inefficient and every dollar the government spends is a dollar less the private sector has to spend on its own expansions.”

Mitt Romney is vowing to cut taxes by 20 percent across the board and pay for those cuts by eliminating loopholes. Romney also says he believes in a progressive tax structure.

“I like his tax plan,” Moore says. “I don’t agree with everything in it but [I agree with] the basic concept, which Ronald Reagan did with Dan Rostenkowski and Bob Packwood and Ted Kennedy and Democrats back in the 1980s.

“It’s amazing how the Democrats have moved to the left. Back then, what we did is we cut tax rates significantly, very significantly, and we closed off loopholes to make a much more efficient tax system and it worked really well. That’s what Mitt Romney, for the most part, is trying to do — get rid of the pollution and the special interest carve-outs in the tax system, lower the rates for everybody.

“It’s been proven time again, that’s a very productive way to get the economy moving again. The numbers can add up. Ronald Reagan proved the numbers can add up. When we did the 1986 tax act, that lowered the rate all the way down to 28 percent. We actually got more revenues into the treasury, not less.”

Asked to give Romney’s plan a letter grade, Moore responds: “I’ll give him a B-plus. The tax plan is strong and it will move us right in the right direction.

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“Now I’d like to see a flat tax. I’m a Steve Forbes guy. One rate for everybody with no deductions, no loopholes and you get rid of the double tax on saving and investment. That would be the optimal tax system but Mitt Romney’s plan moves us in that direction.

“Interestingly, under Mitt Romney, the top tax rate would be about 28 percent. Under Barack Obama, the top tax rate goes up to 42 percent. That’s a big difference.”

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Wall Street Journal economics expert Stephen Moore tells Newsmax that there is no case on economic grounds to heed President Barack Obama's call for higher taxes on wealthier Americans.
Tuesday, 09 October 2012 01:11 PM
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