AQR Chief Decries Fiscal Cliff Debate

Jan 9 2013 | 11:02am ET

Having failed to convince his fellow Americans to not reelect President Barack Obama, AQR Capital Management chief Cliff Asness is blasting Obama's successful push for higher taxes on the wealthy.

In a column published by right-wing thinktank the American Enterprise Institute, Asness argues that the only way to pay for government entitlement programs is by significantly raising taxes on everyone, especially the middle class.

"The poor don't have the money to pay for a European-style welfare state, and the rich, rich as they are, don't have anywhere near enough," Asness writes.

What's more, he goes on, his fellow billionaires have some tricks up their sleeves even if you tried to get them to pony up.

"Soaking the rich means taxing investments. Investments are complicated and can be restructured to minimize taxes," Asness writes.

"Raising significantly more taxes from the rich also requires higher marginal tax rates—and their rates are already quite high. High marginal rates distort the economy and yield less revenue than anticipated because they increase the rewards for legal and illegal tax avoidance."

Asness frames the column as an argument for an honest debate; as he puts it, "to be in our political center today, you have to deny both these truths," namely that current tax rates can't pay for everything, and that in order to pay for everything taxes on everybody have to go up. Of course, he's not exactly hiding which side he thinks you should come down on.

"If we are to redistribute like Europe, we must tax like Europe. The middle class must pay more taxes and they must pay a larger share of the tax burden."

"The choice the country faces is simple. We can have big government and the Life of Julia (at least for a while, but that is another essay), with everyone paying through the nose and the middle-class share of taxes rising not falling, or we can return to the American tradition of limited government, with everyone paying a smaller burden to the state, with relatively limited services for, and relatively light taxes on, the middle class."


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