Jewish World Review May 24, 1999 /9 Sivan 5759
Income, taxes and demagoguery
(JWR) ---- (http://www.jewishworldreview.com)
WHEN YOU HEAR POLITICIANS and intellectuals talking -- often very loudly --
about "the rich," do you ever wonder who they are talking about and how much
money those "rich" people make? And do you ever wonder why those who are
making so much noise about the rich don't just come right out and tell us
what kind of money they are talking about?
Instead, we hear about the top 10 percent or the top 5 percent. But why so
squeamish about saying how much money that represents?
There is a reason for all this noise about the rich ---- and for all the
silence about how much money is involved. Talking about the rich is
politically very useful for whipping up envy and getting support for heavy
taxes. But the incomes of most people in the top 5 or 10 percent are a lot
less than most Americans would consider rich.
If the incomes of all the people in an American household adds up to
$72,000, that puts them in the top 10 percent of all households. But, when a
husband and wife make $36,000 apiece, most of us would not consider them
rich. Nor would we be likely to think that putting heavy taxes on them would
be a good idea.
Any attempt to lower the taxes of such a couple is guaranteed to bring out
the noisy demagogues in Congress, denouncing "tax cuts for the rich" because
people in the top 10 percent would benefit. But the only people whose taxes
can be cut are the people who are paying taxes -- mostly people in the upper
brackets, who are not rich.
Even the top 5 percent of households do not usually fit what most of us
would consider to be the rich. If all the incomes in your household add up
to $127,000, then you are one of those top 5 percent who are so rich that
the government thinks it should be taxing you like mad.
That's $63,500 apiece if husband and wife are both working ---- about what
mid-level civil servants would make. Or, if only one person is working and
earning the whole $127,000 alone, that is about the average salary of a
college president -- and much less than the average income of a college
athletic coach. It is nowhere in the ball park compared to the incomes of
top lawyers, corporate executives or professional athletes.
What about the really rich people --- the ones with their own private jets
and mansions here and there? There are such people but there are not enough
of them to affect the statistics very much. Moreover, genuinely rich people
usually have tax accountants to go with their jets and mansions, so that
they can keep their jets and mansions.
The people who really get hit hard by taxes that are supposed to be soaking
the rich are ordinary people who happen to be at the stage of their lives
where they are earning more than they did in years past and more than they
will be earning in the future. These are largely people in their 50s or
early 60s who have worked their way up to a decent income and are seeing
much of it drained away by politicians who proclaim that "the rich" ought to
pay "their fair share."
This "fair share" is as completely undefined as "the rich" themselves. The
demagogues don't dare talk specifics in either case or people will start to
see through them.
If we look at wealth instead of income, it becomes even more obvious that
"the rich" are not a different class of people but largely people in older
age brackets who have accumulated some money in a pension fund, paid off
most of their mortgage and put a little money aside to see them through
retirement and the illnesses of old age.
The average net worth of households headed by someone 65 years old or older
is more than 10 times the net worth of households headed by someone under 35
years of age. But these aren't different classes of people, because everyone
who is 65 or older was once 35 or younger.
Many of the statistical "poor" are just as fictitious as the statistical
"rich." For most Americans, being in the bottom 20 percent of the income
distribution is strictly a transitional phase. More of them rise to the top
20 percent than remain at the bottom, and the rest of them are scattered all
Most Americans are likely to have incomes in the top 10 percent at some
point or other during their lives. So when politicians start talking about
taxing the rich, send not to know for whom the bell tolls. It tolls for
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©1999, Creators Syndicate