Taxing the rich will not stop financial collapse, inflation: economic experts

The fiscal cliff deadline is soon approaching for the United States and many believe the country would be in great danger if it did indeed head off the fiscal cliff and suffer an economic collapse on Jan. 1, 2013, according to a new national CNN/ORC International poll.  Nearly half (44 percent) say it would cause major problems, while only seven percent responded that there wouldn’t be much to worry about.

The new poll, which was released Monday, found that two-thirds of Americans are concerned, while 70 percent say a compromise on the issue would be necessary.  However, two-thirds predict that the Republicans and Democrats will act like “spoiled children” instead of “responsible adults” in the negotiations.

Although much of the respondents blame Washington in its entirety, the Republicans in Congress would receive a greater share of the culpability (45 percent).  President Barack Obama and Democrats in Congress are calling for an increase in taxes for the country’s wealthiest and the Republicans want an end to loopholes and reform in the tax code.

“Americans aren’t sanguine about the prospects of a deal. Only 28% say that Washington officials will act like responsible adults in this matter, with 67% saying they believe they will behave like spoiled children,” said CNN Polling Director Keating Holland in the media release.

What to do?  A majority of the public concurs with a mix of spending cuts and tax hikes, but one-third believes any fiscal cliff deal should only include spending cuts.  A significant portion of Republicans, Democrats and Independents support the combination.

Meanwhile, 56 percent of Americans want high tax rates on the nation’s affluent so the government can spend it on social programs and more than one-third of survey participants want taxes on high-earners to be low because businesses can invest that money, improve the economy and hire more workers.

In an interview with NBC’s Matt Lauer on Tuesday, billionaire investor Warren Buffett said raising taxes on the rich will not hinder economic growth and it would boost the morale of the middle class.

“No, and I think it would have a great effect on the morale of the middle class,” stated Buffett.  “They’ve had to watch guys like me pay below the rate by that paid by the people in my office.”

Buffett also published an op-ed piece in the New York Times in which he called for a permanent tax on the wealthy.  His idea would be for the Congress to implement a minimum tax on high incomes: 30 percent of taxable income between $1 million and $10 million and 35 percent on anything more than that.

According to many, Buffett is just wrong.

Curtis Dubay of the Heritage Foundation wrote a blog that warned if Congress were to adopt Buffett’s minimum tax it would hurt the middle class the same way the Alternative Minimum Tax (AMT) did, which the writer noted has hurt the middle class more than the rich.

Dubay also wrote that much of the Buffett Rule is already taking place with the top one percent of earners paying a 29 percent effective tax rate on all federal taxes – three times higher than the 11 percent tax rate paid by the middle class.

“If Buffett still remains worried that tax receipts are too low, despite the facts that show it isn’t, he should be reminded that the Treasury Department is happy to take donations from him and his fellow billionaires any time they want to cut a check,” concluded Dubay.

Daniel Mitchell of the Cato Institute argued in a piece that a fiscal cliff would be bad, but the president’s plan to repeal the sequester and exacerbate the tax hikes on the rich would be an even worse possible outcome.  He stated that the U.S. has let go of spending restraints from the 2011 debt limit agreement and will put forth many tax increases in its place.

The president, according to Mitchell, wants to double the size of tax rates on the high-income earners.

“If Obama prevails, he’ll be rewarded for dogmatism, but he won’t find a pot of gold at the end of the class-war rainbow,” said Mitchell.  “Successful taxpayers will adjust their behavior in ways that reduce taxable income, which means the government won’t get much money even though it will impose a lot of damage.”

Economic Collapse News reported in October that even if the Internal Revenue Service (IRS) taxed 100 percent of incomes from the affluent, it would only keep the government open for an additional three to five months and generate approximately $616 billion.

Retiring Texas Republican Congressman Ron Paul spoke with CNN late last year and explained that it’s not the paucity of taxation in Washington, but the primary issue is too much spending going on between the Republicans and Democrats.

“We should stop all the subsidies to the wealth, anybody who is getting wealthy because they get contracts from the government or because they are on the inside of the program where they get the bail outs, that’s quite a bit different, we should stop that, but not blanketly penalize people who make wealth and who have created wealth,” said the three-time presidential candidate.  “The system has been biased against the middle class and the poor, when you destroy a currency you transfer wealth from the middle class to the wealthy.”

CNBC also discussed the inflationary aspects of raising taxes on the wealthy.

“You can’t fight inflation by taxing the wealthy. And since fighting inflation is the primary reason our government would need to raise taxes, the proposals to raise taxes on the wealthy just don’t add up,” stated senior editor John Carney.

The CNN telephone poll was conducted with 1,023 adult Americans between Nov. 16 and Nov. 18.  It contains a margin of error of +/- three percentage points.

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