Spreading The Wealth

Over the weekend, I noticed that the conservative blogs were up in arms about Obama’s statement that “when you spread the wealth around, it’s good for everybody.” Having seen the video, I thought this was pretty silly. But now that John McCain has started misrepresenting what Obama actually said, I thought it might be a good idea to get clear about this.

Regrettably, ABC News does not let me embed their video, or even copy the relevant parts of their transcript. The video of Obama’s entire conversation, along with the transcript, is here. I urge anyone who is bothered by what Obama said to go watch or read it. Here’s the gist:

Joe the plumber asks: wouldn’t I, a guy who is thinking of buying a business with a little over $250,000 in revenue, pay more under Obama’s plan? After Obama explains what his plan does, Joe says: look, I have worked hard, and I’m just getting taxed more and more. Obama replies: well, there are two ways of looking at it. One is that you’ve worked hard, you’re successful, and now you’re being penalized for your success. But here’s another: you were probably working just as hard earlier, when you were starting out. And under my plan, you would have gotten more money then, and so you would have been able to save more, and you would have gotten to where you are today more quickly.

Obama then points out that taxes have been cut a lot for people who are doing well, but that ordinary folks are not doing nearly so well — in fact, their average income has gone down over the last eight years. And (after a bit about the flat tax) he says:

“For folks like me who have worked hard, but frankly also been lucky, I don’t mind paying just a little bit more than the waitress that I just met over there who’s — things are slow and she can barely make the rent.

My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody. If you’ve got a plumbing business, you’re going to be better off if you’ve got a whole bunch of customers who can afford to hire you, and right now everybody’s so pinched that business is bad for everybody, and I think when you spread the wealth around, it’s good for everybody.”

This is what John McCain was referring to last night when he said:

“You know, when Sen. Obama ended up his conversation with Joe the plumber — we need to spread the wealth around. In other words, we’re going to take Joe’s money, give it to Sen. Obama, and let him spread the wealth around.

I want Joe the plumber to spread that wealth around. You told him you wanted to spread the wealth around.”

But that’s just not what Obama said. He did not say that he wanted to spread Joe’s wealth around. He certainly did not say that he thought he was entitled to simply expropriate Joe’s wealth and distribute it to poor people, like Robin Hood. He said he wanted to spread the wealth: i.e., to have a tax code that is less skewed towards the wealthy. That’s Obama’s radical idea: progressive taxation.

Hand me my smelling salts!

If any change in people’s proportionate tax burdens counts as expropriating the money of those who end up paying a greater share and giving it to those who pay a lower one, then any President who has ever enacted changes in the tax code has expropriated people’s wealth. George Bush, for instance: in 2004, his tax cuts gave a 2.3% increase in after-tax income to the middle 20%, but a 6.3% increase to millionaires. This shift of tax burdens from the rich to the poor is obviously just an attempt to take poor people’s money and “spread” it to rich people.* And Ronald Reagan: he raised payroll taxes while cutting the top marginal rates: more expropriation!

Moreover, Reagan signed the 1986 tax reform bill into law: that bill eliminated a lot of corporate tax loopholes that had allowed some major corporations to pay “little or nothing in income taxes”. In other words, these corporations’ share of taxes went from zero (or near zero) to the same rate as other corporations, for no better reason than some misguided notion of “fairness.” Socialist expropriation!

And don’t even get me started on the monstrous socialist transfer of wealth that increases in the child tax credit or education credits involve. Socialist, the lot of them.

Changing the tax code in such a way that the proportional burdens of different groups of people also change is not socialism. It’s just a change in tax policy.

* Someone might say: but Bush’s tax cuts didn’t raise anyone’s taxes, so he can hardly be expropriating anything. This is wrong: by increasing the deficit, Bush’s tax cuts will cause us all to pay more later, and will also lower our standard of living over time. There is no free lunch.