Chris Matthews: 'Why Is Taxing The Rich So Hard?'

As NewsBusters has been reporting, since President Obama once again proposed letting the Bush tax cuts expire for the highest earning Americans, the media have been supporting it almost 24 hours a day.

Doing his part this weekend was Chris Matthews who after the introduction of the syndicated program bearing his name actually began the show, "Why is taxing the rich so hard?" (video follows with transcript and lots of commentary):

CHRIS MATTHEWS, HOST: First up: Why is taxing the rich so hard? Americans know we're going to all end up feeling the cuts in what our government can do no matter what plan finally gets signed. So why is ending the Bush tax cuts for the wealthy a stumbling block? Ending those Bush tax cuts would bring in at least $700 billion over the next ten years. That's substantial. It’s roughly the same amount Obama would get from all his domestic spending cuts.

That's substantial? The Congressional Budget Office claims the budget Obama proposed in February would add $9.5 trillion in debt in the next ten years, and Matthews thinks cutting $700 billion by raising taxes on everyone making $250,000 or more is "substantial":

MATTHEWS: So, take a look at history. The top tax rate now is 35 percent, but back in the New Deal in the ’30s it was 79 percent. Under Ike in the ’50's it was 91 percent. Under Richard Nixon, the top rate was 70 percent. Then things began to come down under Reagan, when the top rate was still 50 percent. Under Bill Clinton it was down to 39 percent. Under George W. Bush, down to 35 where it is. Becky, what is this historically low? Why is it so hard for the Congress, when they get together, to actually raise the top rates back up a bit for the rich?

It's amazing how liberal media members always want to bring up the top tax rates of the past as if they really mean anything.

The 79 percent rate that started in 1936 was for folks that made $5 million or more. That would be $80 million in today's dollars. The 91 percent rate first introduced in 1954 was for people making $400,000 or more. Today that's $3.3 million.

As for the tax rates during the Nixon years, what Matthews and most folks ignore is that in those days, earned income and unearned income - meaning from interest, dividends, capital gains, etc. - were taxed differently. Starting in 1971, the top rate for unearned income was 70 percent, but only 60 percent for earned income of $200,000 or more. This actually dropped to 50 percent in 1972. $200,000 then is equal to $1 million today.

Another thing Matthews got wrong: the top rate was dropped to 28 percent in Reagan's final year in office. George H.W. Bush was pressured by a Democrat Congress to raise this to 31 percent in 1991 with Clinton increasing it to 39.6 percent two years later.

With the record straighter, let's continue:

BECKY QUICK, CNBC: Because the tax code is a mess right now. If you look at all the deductions that have been taken, if you look at all the loopholes that people and corporations can slide right out of, it's a complete mess.

MATTHEWS: But if they have all those loopholes, why do they need a lower rate besides?

QUICK: Why don’t you get rid of loopholes and create an actual rate? Right now, 47 percent of Americans don't pay any taxes at all, income taxes. So, if you’re looking…

MATTHEWS: But aren’t they the poor people?

QUICK: Well, if you’re looking at, sometimes, yeah, but if you're looking at a system where half the tax, half the people don't have any skin in the game, you're talking about a very unfair situation.

Indeed, which is a fact most liberal media members typically choose to ignore: in 2009, a little over 47 percent of Americans paid no federal income taxes whatsoever.

As the Tax Foundation reported in 2005:

Despite the charges of critics that the tax cuts enacted in 2001, 2003 and 2004 favored the “rich,” these cuts actually reduced the tax burden of low- and middle-income taxpayers and shifted the tax burden onto wealthier taxpayers. Tax Foundation economists estimate that for tax year 2004, a record 42.5 million Americans who filed a tax return (one-third of the 131 million returns filed last year) had no tax liability after they took advantage of their credits and deductions. Millions more paid next to nothing.

As Figure 1 and Table 1 show, the number of Americans who paid no income taxes because of the preferences in the tax code has varied greatly since 1950. While the number of these “non-payers” has averaged about 22 percent of all filers over the past five decades, it has spiked to record levels in recent years and the trend line does not appear to be slowing.

In the '50s when the top tax rate was 91 percent, the percentage of Americans paying no federal income tax was in the low 20s. In 1969 when the top tax rate was actually 77 percent, 16 percent of Americans paid no federal income taxes.

Yet now with the top rate of 35 percent, combined with reductions in the lower brackets as well various credits for low income earners such as the earned income credit, the number of people not paying federal income taxes at all has exploded to almost half the nation.

What this really means is that calling the Bush tax cuts "for the rich" is absurd. In reality, since the number of people not paying taxes skyrocketed as a result, these cuts had a monstrous impact on the folks that aren't rich who now have no federal income tax burden whatsoever.

Let's continue:

MATTHEWS: Well, I worry about this reform first thing. Go ahead, Joe.

JOE KLEIN, TIME: Wait a second. You know, the big items in this budget are the entitlements like Social Security and Medicare, and everybody pays those taxes. In fact, they are quite regressive, because the poor pay the same rate as the rich.

QUICK: Which I agree. But why don't they do means testing on that?

KLEIN: Well, alright. Means testing wouldn't be a bad idea.

Indeed. That's why means testing for Medicare is in Congress Paul Ryan's (R-Wisc.) budget plan. Isn't it interesting Klein's for it when Quick proposes it?

On the other hand, Klein was about to prove the point concerning why referring to Ike's 91 percent bracket is very misleading:

KLEIN: The other thing is this: no one ever paid 91 percent during Eisenhower. There were always huge, huge loopholes. Remember when you didn’t, you'd get reimbursed for sales taxes and things like that? I think that a good tax reform would, you know, is due. We get them every 25 years. The last one was in 1986.

Hmmm. Isn't tax reform in Ryan's plan? I guess that's another thing Klein forgot:

MATTHEWS: Well, let’s go back to the reason this became a hot issue, Andrew. Back under Reagan, who was the great fire breather when it came to, when he went into acting, everyone knows this story. He looked at his first check. It probably was $100,000 or something. He was paying 90 percent. He didn't have all those loopholes and all those shelters. So he became a fire brand for lowering rates, and now the Republicans have big philosophical stakes here. What are the best Republican arguments for lower tax rates for the rich? What's their case?

ANDREW SULLIVAN, DAILY BEAST: Well, simply because the less government takes, the more individuals have, and individuals are better judges of how to spend their money than government. That's the core basic idea, and I agree with it. It just so happens that when you have this kind of debt and deficits and you rule out any revenue increases, you make your cuts so much more Draconian. I mean, in England, where the Tories are really doing a real austerity spending cut package, they also have tax increases.

MATTHEWS: So they’re balancing it out.

SULLIVAN: They had an increase in sales tax. They kept the top rate at 50 percent. These are people cutting more deeply than Thatcher. For the Republicans to move the entire question of taxes off the table is a non-starter I think for most people.

MATTHEWS: You know, one of the things we talk about is the fact that a lot of the rich, as you would probably point out, you have the numbers that a lot of the rich pay a lot of the taxes, they do pay a bigger share. But we also see studies, Norah, that there's a big gap growing in this country. Everybody knows about it. The very wealthy are doing incredibly well, the zillionaires and below that level, really well, and the poor people are getting pushed down, pushed down, pushed down. Isn't that a case where a higher rate for people who make big money?

Okay, so let's really understand the depths of the stupidity on display here.

As a result of the Bush tax cuts, the percentage of people paying no federal income tax has skyrocketed. As Matthews said earlier, these are largely poor people, although some are in the lower-middle as far as wages.

Despite what the Left have been saying for almost ten years, these cuts were a good thing for the bottom half of the income ladder in our nation. If they didn't also change the income disparity, the logical conclusion is that tax rates aren't the cause of such disparity.

As such, raising taxes on the rich not only won't increase the income of the bottom half of the population, but also since the $700 billion this will generate in the next ten years represents only seven percent of the projected deficits, it's likely taxes will have to be raised on everyone thereby further harming the less fortunate.

Enter NBC News's Norah O'Donnell stage left: 

NORAH O’DONNELL, NBC NEWS: Yes, and America is drowning in debt, and everybody gets that. The key question now is not just cutting spending, because even Paul Ryan’s austere budget will not balance the budget until 2040. There has to be another part of this. 70 percent of Americans, in the NBC News/Wall Street Journal poll, support raising taxes for people above $250,000. The numbers’ almost exactly the same among independents.

MATTHEWS: Why doesn't Congress just do it? You cover it.

O’DONNELL: So, the point is this: the President can propose doing that, and he can get, it is a politically popular move for the President to do that among independents. He can propose that. It would also take a big chunk of the deficit. If you like let all of the Bush tax cuts expire, which include some for the middle class, you would wipe out our debt, three-quarters of our debt in five years.

Obviously she meant deficit, but as NewsBusters reported Saturday, this appears to be a myth first offered by David Leonhardt of the New York Times Wednesday which like a virus then went to HBO's Bill Maher and now O'Donnell. Even if you used the liberal Brookings Institutions' estimate that the Bush tax cuts "cost" $400 billion a year, reimplementing them would at best cut the deficit by 25 percent.

It seems O'Donnell is a arithmetically-challenged as Leonhardt and Maher.

But that's not even the biggest point, for it's clear to even her that the modest amount of revenue you get by going after only the so-called rich is a drop in the bucket, and that the next step is going to be to eliminate all of the Bush tax cuts which will have a far more negative impact on the bottom half of the nation not currently paying taxes than those people Obama, the Democrats, and his media minions despise.

We can only hope that Americans across the fruited plain will see through this charade before November 2012.

Stay tuned.