Today, David Leonhardt has an op-ed in the New York Times: “When the Rich Said No to Getting Richer.” You can read it online here https://www.nytimes.com/2017/09/05/opinion/rich-getting-richer-taxes.html . The gist of it is the recommendation to massively increase the top tax rates in order to fight inequality. As exhibit number one, the op-ed is constructed around George Romney, father of former Massachusetts governor Mitt Romney. The article said that George Romney was an automobile executive and half a century ago volunteered to not earn more than $225,000 a year, close to $2 million today. It also states that the top tax rate at the time was 91 percent. Leonhardt keenly observes that “the high tax rates … didn’t affect only the post-tax incomes of the wealthy, … [it] also affected pre-tax incomes,”. Leonhardt quotes the economist Gabriel Zucman as saying that “It’s not worth it to try to earn $50 million in income when 90 cents of an extra dollar goes to the I.R.S.”
The article attributes that voluntary Romney-income-bound to his Mormon beliefs. Perhaps that was it. Perhaps it was also that he figured there are better things to do in life than slaving away for your company, and passing on all the fruits of your labor to the tax man. Just don’t work so hard! Here, I completely agree with Gabriel Zucman, but for obviously different reasons than David Leonhardt.
Ah, which car company did George Romney work for, by the way? I did a quick Google search and found that he was president of the American Motors Corporation from 1954 to 1962, headquartered in Southfield, Michigan back then. Romney is credited with turning that company around, “focusing all efforts on the compact Rambler car” (and don’t we know how much Americans love their compact cars!) and that he was media-savvy. I am not sure how much of a long-lasting impact that “turn-around” on AMC had. Wikipedia mentions that it was ultimately acquired by Chrysler. Wikipedia writes that “at its 1987 demise, The New York Times said AMC was ‘never a company with the power or the cost structure to compete confidently at home or abroad.' ” I have to trust the New York Times, right? That does not sound like George Romney left a fantastically successful car company behind, securing the jobs of his workers.
The Michigan car industry generally isn’t doing all that hot, is it? So, Michigan car workers, how did that 91% top tax rate work out for you? Happy that George Romney didn’t feel like putting in that extra effort that could have saved your jobs? How do you like the lack on inequality (in dollar terms) in Michigan, when nobody has anything anymore?
I hope the New York Times keeps publishing more op-eds like these. They are really fun to read. Paul Krugman next, may be?