By Hugo Gurdon
What was the greatest trick ever pulled? Was it the devil convincing the world he didn’t exist, as Charles Baudelaire said and Keyser Söze repeated? Or maybe it was Soviet Socialists and their acolytes persuading the world that National Socialists were right wing? Perhaps it was one of those. But in America for several decades, it is surely Democrats tricking people into believing they’re on the side of the little guy.
President Joe Biden touts his proposal for another $5.5 trillion of welfare spending, saying it’s “an ambitious plan to create jobs, cut taxes, and lower costs for working families — all paid for by making the tax code fairer and making the wealthiest and large corporations pay their fair share.”
The White House website makes the president seem like Robin Hood taking from the rich to give to the poor. The claim is so laughable that there should also be a picture of shrunken Joe in forest green doublet and hose just to make the joke clear.
The idea that Biden’s policies help ordinary people by digging deeper into the pockets of the wealthy is a crock. As Phil Gramm, former chairman of the Senate Banking Committee, and Mike Solon wrote in the Wall Street Journal recently, Democrats want the wealthiest to be able again to deduct the sky-high taxes levied by the profligate governments they elect in blue states and slough them on to other federal taxpayers and into public debt. If Biden really planned to prevent the best-off taxpayers using sophisticated accounting to avoid liabilities, he’d have proposed restoring the Alternative Minimum Tax rather than lifting the cap from State and Local Tax deductions.
Not that I’m a fan of the AMT; I’m not, partly because wealthy Americans already contribute a bigger share of tax revenues than their counterparts do in any other country. The problem with our tax code is not that rates are too low, but they’re too high and discourage wealth creation and job growth. It’s galling to see glaringly false advertising by Biden and his colleagues as they try to fool voters into believing they’re looking out for the poor and downtrodden.
The tirelessly and tiresomely repeated claim that the president’s plan would increase taxes only on people earning more than $400,000 is false. It is already dipping deeper into the pockets of everyone in this country, right down to those living below the poverty line.
Here’s how. By handing out unnecessary federal checks, supposedly to stimulate the economy, and by pressing for the biggest increase in further spending in history, Biden is stoking inflation. Because of him, more and more dollars are chasing goods that are in shortening supply in part because there are a record 10 million job vacancies nationwide.
Prices are rising faster than wages — 5.4% year over year and more than 6% so far this year — which means that unless you get a 6% pay raise, the value of your take-home check is falling. As many economists — for example, Thomas Sowell — have pointed out, inflation is essentially a tax and one that falls disproportionately on the poor.
Federal taxes take buying power out of everyone’s pocket and put it into the Treasury to pay for welfare programs. Inflation, likewise, takes buying power out of your pocket to pay for federal spending. What’s the difference? Only that that former is official and the latter stealthy. But both intentionally do the same thing.
Inflation is the most regressive tax of all. The “wealthy” — those well off enough to benefit from SALT, for example — spend a smaller proportion of their incomes on food and energy than the poor do. They have capital investments, such as in homes, the prices of which are rocket-boosted by inflation as the value of a dollar collapses. Inflation is the borrower’s friend because it reduces the value of debt, whether that be the debt piled up in Treasury paper by Biden & Co. or the mortgage debt of the upper-middle and wealthiest classes.
Inflation doesn’t benefit people who live hand to mouth or those who don’t have investments. Little guys do not own their own homes, or second homes, and spend far more of their income on goods and services needed for day-to-day living. So inflation hits them hardest. A government that lets inflation rip, as Biden’s administration has, is not on the side of the poor. It is taxing them even though it keeps insisting it isn’t.