Marketplace of Ideas Blog

Former Delaware Gov. Pierre du Pont believes Barack Obama and a largely Democratic Congress will make policy changes that will make the U.S. look more like a European country.

First Trust Portfolios’ Brian Wesbury and Robert Stein agree:

In the end, the kind of progressivity proposed by Mr. Obama is not sustainable over the long run. Policymakers, hungry for revenue to finance further expansions in government spending — like national health care, or just meeting the huge unfunded liabilities already built into Social Security and Medicare — will eventually find that upscale taxpayers are tapped out and that the only way to get more revenue is to tax the middle class.

After all, the government is so big that it cannot possibly fund itself on just the rich. For example, if the US government confiscated the total wealth of the Forbes 400 — a total of $1.6 trillion — it could only finance the U.S. budget for about 6 months. And if it did that it would take away billions in charity money such as that pushed into the Gates Foundation by Bill Gates and Warren Buffet. So, the only way to generate more money is to tax the middle class.

One way to do that would be to introduce Western Europe’s favorite tax: the Value Added Tax. This would actually tax the middle class even more than if marginal income taxes were raised, while making the tax code less progressive.

In the end, it is clear that financial markets have many things to fear. Income redistribution, like France and other social welfare states, leads the list.