Back in June, Mitt Romney's top economic adviser Glenn Hubbard caused a stir when he took his partisan politics beyond the water's edge and onto the op-ed page of a German newspaper. Now, the man the New York Times labeled Romney's "go-to economist" has uttered something far more appalling, if entirely predictable. "The rich," Hubbard declared, "are taxed enough." As it turns out, Uncle Sam's total tax bite as a percentage of the nation's economy isn't just at its lowest level in 60 years. The effective tax rate for American millionaires--one which Governor Romney's plan will slash further-- has been plummeting for two decades.
The former head of President Bush's Council of Economic Advisers made his remarks during Monday's Intelligence Squared Debate. There, Hubbard echoed Bush's 2004 pronouncement that "the really rich people figure out how to dodge taxes anyway." As ABC reported:
"Raising tax rates on the rich is both counter-productive and unnecessary to fund the government we want," said Hubbard.
While steering clear of specifics, Hubbard told the audience at the Intelligence Squared Debate that "higher tax rates won't necessarily produce enhancements in revenue."
"We can and should achieve fairness and growth without taxing the rich more than they are today," he said.
It was altogether fitting that Hubbard's debate teammate was supply-side snake oil salesman Arthur Laffer. The architect of the fiscally reckless and thoroughly disproven Republican mantra that "tax cuts pay for themselves," Laffer told Fox News in 2009 that raising revenue "cannot be done at the high end because those people can get away from it" for a very simple reason:
"I mean, you really can't collect much money from upper-income people. They know how to get around taxes."
Of course, Mitt Romney has become the poster boy for tax avoidance that Bush, Laffer and Hubbard endorse. But his paltry 14 percent tax rate isn't just the result of endless machinations avoid paying his fair share to the United States Treasury. Changes to the tax code over the past two decades made Mitt's pittance possible.
As the Center on Budget and Policy Priorities revealed in the chart above, the effective tax rate paid by millionaires and those among the top 400 richest earners in the country has been falling for years even as their incomes have reached stratospheric levels. Despite right-wing mythology to the contrary, economic expansion and employment growth were both faster when taxes on supposed "job creators" were much higher than they are today. (It is also worth noting that while most Americans are still recovering financially from the Bush recession that began in December 2007, by 2010 the wealthy had more than made up their losses.)
But it wasn't just the Bush tax cuts of 2001 and 2003 (which Glenn Hubbard helped put in place) which created this perverse result. The plummeting tax bill for the upper-crust is due in large part of the reductions in capital gains taxes both parties pursued over the past 25 years. An analysis by the Washington Post concluded that "capital gains tax rates benefiting wealthy feed [the] growing gap between rich and poor." As the Post explained, for the very richest Americans the successive capital gains tax cuts from Presidents Clinton (from 28 to 20 percent) and Bush (from 20 to 15 percent) have been "better than any Christmas gift":
While it's true that many middle-class Americans own stocks or bonds, they tend to stash them in tax-sheltered retirement accounts, where the capital gains rate does not apply. By contrast, the richest Americans reap huge benefits. Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.
This convenient chart tells the tale:
But Glenn Hubbard's deceit hardly ends there. Republican politicians and their conservative water-carriers pretend that it's always 1980 (when the top marginal rate was 70 percent) or 1944 (when it topped 90 percent). As Dylan Matthews explained in the Washington Post today ("When taxes are high, raising them hurts. When they're low, not so much."), research shows the impact of a small tax increase on wealthiest Americans has almost no impact on the economy when current rates are low, as they are now:
So the more realistic Jaimovich and Rebelo's model gets, the less likely it is to see any effects on growth of increasing taxes for high earners, and certainly if the increases are as small as the ones Obama has been proposing. That's in line with a recent Congressional Research Service study that found zero effect of changes in top tax rates on growth.
There's definitely a point at which high tax rates for the rich hurt growth. But we're nowhere near there yet.
Nevertheless, Glenn Hubbard's would-be future boss (Hubbard is rumored to be at the top of Mitt Romney's list for Treasury Secretary) would slash taxes for the rich further still. The nonpartisan Tax Policy Center estimated that Romney's plan would result in a tax increase for the top 5 percent and increase for everyone else. But while Team Romney has protested that their magical scheme to close some to-be-determined deductions and loopholes would prevent that from happening, neither Mitt Romney nor Paul Ryan has had the courage to name a single tax break they would close. Or as Glenn Hubbard explained when Romney rolled out his 20 percent across-the-board cut earlier this year:
"It is not his intention to take on any specific deduction or exclusion and eliminate it."
Apparently, all Hubbard is willing to tell the American people is that "the rich are taxed enough."
(For more background and charts, see "15 Things the GOP Doesn't Want You to Know About Taxes and the Debt.")