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Opinions/Editorials Title: The Social Contract This week President Obama said the obvious: that wealthy Americans, many of whom pay remarkably little in taxes, should bear part of the cost of reducing the long-run budget deficit. And Republicans like Representative Paul Ryan responded with shrieks of “class warfare.” It was, of course, nothing of the sort. On the contrary, it’s people like Mr. Ryan, who want to exempt the very rich from bearing any of the burden of making our finances sustainable, who are waging class war. As background, it helps to know what has been happening to incomes over the past three decades. Detailed estimates from the Congressional Budget Office — which only go up to 2005, but the basic picture surely hasn’t changed — show that between 1979 and 2005 the inflation-adjusted income of families in the middle of the income distribution rose 21 percent. That’s growth, but it’s slow, especially compared with the 100 percent rise in median income over a generation after World War II. Meanwhile, over the same period, the income of the very rich, the top 100th of 1 percent of the income distribution, rose by 480 percent. No, that isn’t a misprint. In 2005 dollars, the average annual income of that group rose from $4.2 million to $24.3 million. So do the wealthy look to you like the victims of class warfare? To be fair, there is argument about the extent to which government policy was responsible for the spectacular disparity in income growth. What we know for sure, however, is that policy has consistently tilted to the advantage of the wealthy as opposed to the middle class. Some of the most important aspects of that tilt involved such things as the sustained attack on organized labor and financial deregulation, which created huge fortunes even as it paved the way for economic disaster. For today, however, let’s focus just on taxes. The budget office’s numbers show that the federal tax burden has fallen for all income classes, which itself runs counter to the rhetoric you hear from the usual suspects. But that burden has fallen much more, as a percentage of income, for the wealthy. Partly this reflects big cuts in top income tax rates, but, beyond that, there has been a major shift of taxation away from wealth and toward work: tax rates on corporate profits, capital gains and dividends have all fallen, while the payroll tax — the main tax paid by most workers — has gone up. And one consequence of the shift of taxation away from wealth and toward work is the creation of many situations in which — just as Warren Buffett and Mr. Obama say — people with multimillion-dollar incomes, who typically derive much of that income from capital gains and other sources that face low taxes, end up paying a lower overall tax rate than middle-class workers. And we’re not talking about a few exceptional cases. According to new estimates by the nonpartisan Tax Policy Center, one-fourth of those with incomes of more than $1 million a year pay income and payroll tax of 12.6 percent of their income or less, putting their tax burden below that of many in the middle class. Now, I know how the right will respond to these facts: with misleading statistics and dubious moral claims. On one side, we have the claim that the rising share of taxes paid by the rich shows that their burden is rising, not falling. To point out the obvious, the rich are paying more taxes because they’re much richer than they used to be. When middle-class incomes barely grow while the incomes of the wealthiest rise by a factor of six, how could the tax share of the rich not go up, even if their tax rate is falling? On the other side, we have the claim that the rich have the right to keep their money — which misses the point that all of us live in and benefit from being part of a larger society. Elizabeth Warren, the financial reformer who is now running for the United States Senate in Massachusetts, recently made some eloquent remarks to this effect that are, rightly, getting a lot of attention. “There is nobody in this country who got rich on his own. Nobody,” she declared, pointing out that the rich can only get rich thanks to the “social contract” that provides a decent, functioning society in which they can prosper. Which brings us back to those cries of “class warfare.” Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an “existential threat” to America. Yet they are insisting that the wealthy — who presumably have as much of a stake as everyone else in the nation’s future — should not be called upon to play any role in warding off that existential threat. Well, that amounts to a demand that a small number of very lucky people be exempted from the social contract that applies to everyone else. And that, in case you’re wondering, is what real class warfare looks like.
Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest Begin Trace Mode for Comment # 26. wealthy Americans, many of whom pay remarkably little in taxes America has the most progressive tax system in the world. The U.S. government soaks successful people like no other country.
America is not a closed economy. We have to compete for investment in innovation and productive capacity with countries around the world. This is what the lunatic left is utterly incapable of comprehending because they have been blinded by their envy.
#16. To: jwpegler (#1) (Edited) America is not a closed economy. We have to compete for investment in innovation and productive capacity with countries around the world. This is what the lunatic left is utterly incapable of comprehending because they have been blinded by their envy. If income concentrated at the top is what an economy needs then the fact that we have the highest income concentration in the industrialized world indicates we should be doing pretty well.
#17. To: NewsJunky (#16) (Edited) If income concentrated at the top yada, yada, yada, blah, blah, blah... completely irrelevant...
Welcome to left-wing loony land.
#19. To: jwpegler (#17) My understanding of your argument here is that if we take income from the job creators we will be at a disadvantage with respect to the other countries who tax their job creators less? From that I conclude you are saying more income concentration is good for economic growth.
#22. To: NewsJunky, badeye, capitalist eric, CZ82, Get Outta Dodge! (#19) (Edited) My understanding of your argument here is that if we take income from the job creators we will be at a disadvantage with respect to the other countries who tax their job creators less? From that I conclude you are saying more income concentration is good for economic growth. Here's the problem: You and other leftists have a fundamental misunderstanding about who the job creators really are. Bill Gates was a pimpled faced college drop out 40 years ago. Now he is one of the wealthiest people on earth. In the process, he revolutionized how we work and play and created 10,000 millionaire Microsoft employees. Today, Microsoft is struggling to stay relevant. They sill make a lot of money, but unless they make big changes soon, they are going to get locked out of the next wave just like former industry giants Dec, Compaq, Borland, Novell, Burroughs, and so many others who are now out of business. On a completely different scale, my dad used to own an auto repair shop. One day this grubby, dirty guy came in and asked my dad if he could save his old car batteries instead of tossing them. The guy came around every week to pick them up. At night, he would break them open and recycle the lead (this was the 1970s -- long before Obama decided the government needed to create "green jobs"). Pretty soon he had so much business that he had to start hiring people to pick the batteries up for him. He'd spend his days talking to new customers, while he recycled the batteries at night. He became a millionaire because he saw an opportunity and worked hard to go after it. Even after he became a "millionaire" he still worked hard to please his customers because this was his business. The point is that we need to facilitate new ideas, new innovations, and new people willing to take a risk. The current system with their bailouts and subsidies and all of the rest is hurting America. It's not hard to make $250,000 a year in America. It takes an idea, a willingness to take a risk, and hard work. Many people that get to the $250,000 level go on to make more because they have a great idea and work hard to build their idea into something substantial. When they do that, they create jobs. Sometimes, like Bill Gates, they create a lot of jobs. Here's the problem: when you do make 250,000 a year two things happen: A.) your middle class tax deductions start disappearing (they start disappearing at $175,000), and B.) you reach the top tax rate. It's a double whammy. This hurts people who are trying to create something new and innovative. That harms America. Why do you want to harm America???
#24. To: jwpegler (#22) JW, thats 100% on the money, no pun intended. I wish I had written it.
#25. To: Badeye (#24) (Edited) Thanks and yes it is the truth. You are a small business owner. You get this. The left just doesn't understand. I don't sleep much. I was channel surfacing yesterday at 4:30 AM Pacific or so and I caught "Morning Joe". They had some woman who is challenging Scott Brown for the Senate next year. They kept calling her "professor". Are the Democrats going to run another no- nothing academic for office??? I think so. People are sick of it. They want someone who can get results.
#26. To: jwpegler (#25) You are a small business owner. You get this. Yes, I am. Yes I do. The Left chooses not to get it. Once you understand that, their insanity almost makes 'sense'.
Replies to Comment # 26. Well... Let's talk about the left their terms. There are two groups in the left: A.) An idiot left who actually believes the nonsense. B.) A tyrannical left who exploits the idiot's beliefs to stay in power.
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