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Davis, California

Saturday, March 2, 2024

Column: The rich and you

Conservatives and liberals both seek a more prosperous American society for all. They simply have different ideas of how to go about achieving it.

In a column entitled “I love the rich” a couple weeks ago, I argued that letting the upper class keep more of their wealth is advantageous for the rest of us. The rich employ a very large number of people while providing capital for average folks to take out loans and start businesses.

Furthermore, they pay an immensely high percentage of the taxes our government takes in, meaning that we already live in a society financed chiefly by the rich.

But my column prompted one guest editorial that brought up a couple common attacks on the rich in America. Staff research associate Frederic E. Vincent alleged in Tuesday’s Aggie that, “the top 1 percent of people holds more than a third of the wealth in the United States, so it’s not surprising that they pay a similar percentage of what the IRS takes in.”

I entirely agree. The rich have a lot of wealth, which means they pay a lot in taxes, which means, precisely as I wrote, that the majority of government services are financed by those who can afford it. Sounds like a good society to me. What, exactly, the problem is that demands the rich pay far higher taxes remains unclear.

A stronger argument comes when Mr. Vincent quotes the famous liberal economist Joseph Stiglitz in a recent article in Vanity Fair. Putting aside the amusing irony of Mr. Stiglitz attacking the rich in a magazine brimming with outrageously-priced fashion catered to those with far higher tastes than I could ever afford, the article claims that incomes for the middle class have fallen over the last decade, while those of the rich have increased by 18 percent.

However, Mr. Stiglitz does not source his figures, nor does he elaborate any further on this key point. Worse, his numbers are absolutely naked of context. Are we talking about inflation-adjusted figures or not? Is this for households or individuals? When we define income, what forms of compensation do we include? Health benefits, retirement funds and capital gains, or just dollars and cents?

I don’t mean to bore anyone with exceedingly dry economics, but if all of these details are left out, the statistic becomes virtually worthless. And if we cannot establish that the poor are actually getting poorer, rather than the rich getting richer with no harm done to the poor, then so much of the rest of the far left position on tax rates collapses.

After a brief e-mail correspondence on the subject, lead budget analyst Brian Riedl of The Heritage Foundation, a conservative think tank in Washington D.C., directed me towards a paper he wrote in 2007 entitled “10 Myths About the Bush Tax Cuts.” As anyone with at least a remote interest in politics knows, the Bush tax cuts are often scorched for allegedly only benefiting the rich. Quite simply, this is not so.

“[F]rom 2000 to 2004, the share of all individual income taxes paid by the bottom 40 percent dropped from 0 percent to -4 percent, meaning that the average family in those quintiles received a subsidy from the IRS,” Riedl wrote. “By contrast, the share paid by the top quintile of households (by income) increased from 81 percent to 85 percent.”

Yes, you read that right. Not only did the Bush tax cuts increase the tax burden carried by the rich, but the bottom 40 percent actually got money back from the IRS. Riedl’s source? The non-partisan Congressional Budget Office.

To expand the picture dramatically, let’s take a look at a September 2008 article in the Wall Street Journal written by economists Arthur Laffer and Stephen Moore to rebut then-candidate Obama’s attacks on the wealthy.

“[I]n 1981, when the highest tax rate on the rich was 70 percent and the top capital gains tax rate was close to 45 percent, the richest 1 percent of Americans paid 17 percent of total income taxes,” the economists wrote. “In 2005, with a top income tax rate of 35 percent and capital gains at 15 percent, the richest 1 percent of Americans paid 39 percent.”

Once again, lower taxes for the rich meant that they shouldered a far higher percentage of the burden, an enormous boon to the rest of us.

In their determined promotion of class warfare, the hard left often paints a false image of the role the prosperous among us play. If we don’t better understand that the rich do so much more for America when we let them keep their money, the economy will continue to struggle, and so will the rest of us.

And that’s something I’m simply too poor to afford.

E-mail ROB OLSON at rwolson@ucdavis.edu.

5 COMMENTS

  1. I read this article and just had to check out the online comments. I wasn’t surprised by all the arguments presented in the comments. Regardless of what we say, big fish always eats little fish.

  2. @Lukacs

    Excellent rebuttal mate. Do you have anything productive to say? I’ll even give you a concise topic to preach on if you like.

    Liberals alike always demonize the rich. They antagonize them as if they are some unwanted scum who show no remorse or concern for others. Let’s say this is true. Let’s remove them from the American society since you would seem to be happier without them trickling down their fountain into the ‘urinal’ of ‘vacant mind[s]’. What is left? How does the American government afford or pay for all the huge programs that you believe the poor need? At the rate liberals are going, we will drive the entrepreneurs, businesses, and rich people out of this country (or at least already trying to drive them out of this state) and create an extremely unstable economy. As much as you may wish this to be all fun and games, anecdotes, and jabs at conservatives, the American economy is a dynamic organism (for lack of a better term). So please, enlighten me as to how you think society would be better off with no rich people at all and the government shelling out tax rebates to the lower socio-economic classes. I’m eager to hear your next witty comment on my username or this beloved urinal analogy of yours.

    Tucker J. Max

  3. Dear person named after a department store,

    Your non sequiturs gleam in the display windows of an otherwise vacant mind. You have proven yourself worthy to join Rob beneath the urinal. No doubt you will find the location “refreshing.”

  4. @Lukacs –

    You seriously didn’t read anything he wrote, did you? Also your lame attempt at an anecdote was a great legitimate economic comeback. You went on to improve in your note, but not by much. Let me address some of my concerns with your points.

    You argue that the rich are allowed to live ‘tax free’. This may be the case, but why is this? How is this? Because the rich make donations that are tax-deductible (to organizations that they often do not benefit from, i.e. organizations for the poor) and therefore reduce the amount of ‘taxes’ they actually pay. They choose to donate their money to organizations they personally want to support, not ones the government mandates them to. This is a personal liberty that all should (and can) be allowed in the American democracy.

    Did you not read his quoted statistic from the CBO on the share of individual income taxes paid? The lower 40% actually make the government pay them to be citizens (i.e. the -4 %) whereas the rich still pay income taxes. This refutes your claim that the “poor pay a much greater share of their income for other kinds of taxes”. In fact, most poor people, through current tax codes, are usually able to receive deductions and other exemptions that allow them to pay less. Regardless, the crude tax rate (percent of income taxed based on income brackets) is far less for the poor than it is for the rich.

    I applaud Mr. Olson for readdressing the subject and restating his article. His viewpoint is refreshing and hopefully so will be the dialogue surrounding this piece as well.

    TJM

  5. Rob Olson kneels, face tilted heavenward, mouth agape, awaiting a golden shower of wealth. Minutes elapse, then days. Finally, a thin, lukewarm trickle descends. Rob carefully positions himself to catch each and every delicious drop. The meager stream dries up, and Rob laps up the drops he missed. “I love you!” he cries gratefully. Noticing a strange taste in his mouth, Rob picks up a glass of water, but then thinks better of it. “If I save this for the rich to drink, more will trickle down, surely.”

    Rob seems to think the poor are actually getting richer, and it’s only the wealth gap that’s growing. No harm, no foul, right?

    Sorry to pop your speculative bubble, but the purchasing power of most people’s yearly wages is at a 50-year low. This means that most people are getting poorer, not richer, despite (what was) mostly steady economic growth, measured in terms of GDP. This also means that consumer debt is at historically high levels, as people try to maintain their middle-class lifestyle—or simply exist—on working-class wages.

    Rob has now written at least two paeans to the plutocracy, arguing that they are oppressed by the enormous tax burden they are forced to bear. Even assuming that they actually pay income tax at the rate they are supposed to—many use loopholes to live virtually tax free—this rate is far lower than it was even under Reagan, and income taxes are only one fifth of all taxes. The poor pay a much greater share of their income for other kinds of taxes, including social security, payroll taxes, sales tax, gas tax, utility tax, lotteries, etc. Poor people also give a greater percentage of their earnings to charity than the rich do, despite the headline-grabbing donations of tycoons, which often come with strings—or chains—attached.

    So while Rob and his supply-side buddies at the Heritage Foundation are defending the poor rich (wtf?) with cherry-picked statistics, the rest of us will get on with this whole class war thing that they have nightmares about.

    http://wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html

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