Why Businesses Should Fear Elizabeth Warren

When you're too liberal for Senate Republicans to confirm you as a top regulator, what do you do? You run for Senate in Massachusetts, of course. As Harvard Law Professor Elizabeth Warren's campaign gears up, we're beginning to hear more about her general political philosophy. Until recently, we mostly heard her talk about predatory or otherwise unfair lending practices as she built up the new Consumer Financial Protection Bureau. Banks feared her then, and their nervousness will likely become shared by businesses more broadly in the days to come.

A recent clip of Warren has become popular, in which she pushes the idea that government expenditures are just as important to success in business as entrepreneurship. If you haven't seen it yet, you can watch it at the bottom of this post. Here's the quote that's got progressives enamored and conservatives fuming:

I hear all this, you know, "Well, this is class warfare, this is whatever."--No!

There is nobody in this country who got rich on his own. Nobody.

You built a factory out there--good for you! But I want to be clear.

You moved your goods to market on the roads the rest of us paid for.

You hired workers the rest of us paid to educate.

You were safe in your factory because of police forces and fire forces that the rest of us paid for.

You didn't have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

Now look, you built a factory and it turned into something terrific, or a great idea--God bless. Keep a big hunk of it.

But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

The rhetoric here implies that entrepreneurs don't want to pay taxes for roads, public schools, and police officers. Of course, this view would be held only by the most extreme of anarchist-leaning libertarians. But let's put that criticisms aside for now. Let's also ignore the fact that state taxes -- not the federal taxes that Warren would have power over as a senator -- generally pay for all of these expenses. Even forgiving these seemingly relevant points, it's hard to see how her argument makes any sense.

In fact, wealthy entrepreneurs as a group do pay more taxes than other Americans -- a lot more. They pay higher rates, as I explained yesterday. And we can take that a step further: they pay many more actual dollars in taxes per capita. And yet everyone has equal access to those common good products, like roads, education, and security. This implies that the wealthy pays far more than their fair share.

Want some numbers? The average millionaire tax filer paid $773,852 in taxes in 2009, while the average filer making less than a million dollars per year paid $7,419.* Of course, the corporations they own also pay taxes separately. The idea that entrepreneurs aren't already paying a lot to reap the benefit of those roads, schools, and cops is sheer lunacy.

So Warren wants higher taxes for the rich. You may or may not agree that the tax code should be more progressive, but claiming that their businesses success was made possible through the taxes paid by lower- to middle-income Americans just doesn't hold up. They are clearly paying a larger share for equal use.

* Note: Before anyone complains that this is a very rough estimate, let me save you the trouble: you're right. I don't have the data to separate individuals from married couples. I also lump a huge number of groups together in these two categories. I also use adjusted gross income, which bothers some people. But despite these complaints, even these rough numbers should make it clear that it's crazy to say that wealthy people don't generally pay far more money in taxes than everybody else for equal use of the products and services the government provides.

Image Credit: REUTERS/Adam Hunger