Sunday, April 17, 2011
Bonanza Column 232 - Who's Carrying Whom?
As I’ve mentioned, my recent columns taking issue with economic policies advocated particularly by the right wing of the GOP have garnered a great deal of criticism from those on the other side of the political spectrum, which is to be expected. This criticism divides into two not particularly equal parts – the greater portion of the responses takes me to task, sometimes with great heat, for employing tactics that the Right has used for years – characterization, insults, and, according to them, presenting only one side of the picture. It may be that characterizing my detractors as troglodytes and favoring the rich is inelegant, but no more so than their characterizations of the Left as bleeding hearts, and profligate spenders – I'm not saying either is right, just that for them to take such umbrage when their own tactics are turned against them is disingenuous at best, and hypocritical would not, in my view, be too strong a term.
The minority of the responses, and the more thoughtful of them, take the case that, since those at the top of the economic ladder pay the most taxes and are, in effect, carrying those at the bottom, they (and most of the writers include themselves in this group) deserve extra breaks. I'm not sure of the merits of that argument, but I am sure the facts behind it are flawed.
A recent post on the New York Times Economix blog cites statistics from two reputable sources – a book published by Oxford University Press studying income and wage inequality in the US from 1913 to 2002 and an analysis of the Federal Reserve Board Survey of Consumer Finances and the Federal Reserve Flow of Funds that was prepared for the Economic Policy Institute.
The first study shows that as of 2008, about 21% of income in the US was received by just 1% of earners. The second looks at disparities in wealth (how much people have rather than how much they make) and shows that wealth distribution is even more skewed than income distribution. The top 1% of earners receive about a fifth of all US income, but the top 1% of Americans by net worth hold about a third of US wealth. Wealth-related inequality, the studies show, has been stable for decades, while income-related inequality has been growing since the 1970’s.
As income grows, however, so does wealth – the highest earners can save more of what they make, accumulating more wealth over time, and have more opportunities to pay less taxes, both because they can afford better tax advice and because the more money you have, the more you can put into vehicles that are taxed as capital gains rather than income. This means that while those in the working and middle classes pay more in taxes ass their income grows, those in the highest income bracket pay less, calling my correspondents’ argument into question. It’s possible that the very wealthy pay more in absolute amounts, but it’s been documented over and over that they pay a smaller proportion of their net worth toward taxes than do the lower 67%.
The Census Bureau reported in September that the poverty rate for 2009 was 14.3%, the highest since 1994, with the number of uninsured reaching a record high. So, as Charles Blow said in another Times blog, who “should be expected to sacrifice a bit for the benefit of the other and the overall health and prosperity of the nation…? The poor, of course. At least that seems to be the Republican answer.”
The GOP are proposing to make the Bush tax cuts for the wealthy permanent and to reduce their taxes even more, ostensibly to promote growth and job creation, despite the incontrovertible evidence that cutting taxes for the wealthy does not create economic growth. For example, the average tax rate for the top 1% of households dropped by 20% from 1979 to 2007 (the overall average dropped by only 8%) and the GDP has shown no correlation with the level of top tax rates. Currently the average tax rate ofr those with an average annual income of about $350 million is lower than the tax rate for average Americans.
And that’s just individuals – while many of the very wealthy manage to minimize their tax exposure, the richest Americans are corporations, which the Supreme Court in the Citizens United ruling says are, in effect, people –some of the richest corporations in America including GE last year pay no taxes at all.
So who’s carrying whom?