Nancy's Millionaires' Tax

By proposing to lower the new surtax on wealthy families to the $500,000 level, Speaker Pelosi also ensures that a tax that was never going to raise much revenue now raises even less. So what precisely is the point of it?

From Politico this morning:

House Speaker Nancy Pelosi told Politico in an interview that she wants to soften a proposed surcharge on the wealthy so that it applies only to families that make $1 million or more. The change could help mollify the conservative Democrats who expect to have a tough time selling the package back home. Their support is the single biggest key to meeting the speaker's goal of having health care reform pass the House by the August recess. The bill now moving through the House would raise taxes for individuals with annual adjusted gross incomes of $280,000, or families that make $350,000 or more. 'I'd like it to go higher than it is,' Pelosi said Friday.

The speaker would like the trigger raised to $500,000 for individuals and $1 million for families, 'so it's a millionaire's tax,' she said. 'When someone hears, '2,' they think, 'Oh, I could be there,' because they don't know the $280,000 is for one person. It sounds like you're in the neighborhood. So I just want to remove all doubt. You hear '$500,000 a year,' you think, 'My God, that's not me.'

Of course by raising the surtax to the $500,000 level, Pelosi also ensures that a tax that was never going to raise much revenue now raises even less. So what precisely is the point of it? Democrats will high-mindedly speak of the "common good," and the need for all of us to take care of each other. In their actual political behavior, however, Democrats exhibit no such romanticism. They recognize that the typical voter approaches politics a great deal more in the spirit of "what can I get?" than in the spirit of "what can I give?" Instead of appealing for sacrifices from all to all, they look for interest groups they can strip in order to support transfers to interest groups they favor. The art of their politics is to select their victims carefully, isolate them minutely, and then exploit them remorselessly. This approach has only one weakness: Its arithmetic is unsound. The money raised by a surtax on individuals earning more than $500,000 would barely even be noticed in the balance sheet of an Obama health program. The mulcting will achieve nothing. Why do it? The answer was given by Friedrich Hayek three-quarters of a century ago: the mulcting is not the means to an end. It is the end in itself.