You Decide

Always decide for yourself whether anything posted in my blog has any information you choose to keep.

Friday, October 22, 2004

 

'Tax cuts for the rich!'

'Tax cuts for the rich!'
Thomas Sowell
 
"With the election season coming into the home stretch, the cry of "Tax cuts for the rich!" is ringing out across the land from Democrats desperate to regain power in Washington. Like many other political slogans, its popularity depends on slippery words and sloppy thinking.
 
First of all, just what does "rich" mean? And does it have any relevance to the kinds of tax cuts at issue?

 The recent release of some of Teresa Heinz Kerry's tax records reveals as much about the confusion over this issue as it does about her financial situation. The Kerrys are clearly rich, with several homes, a private jet, and millions of dollars in annual income. Yet they paid just 13 percent of their income in taxes.

 That's less than most American pay -- and it is not due to "tax cuts for the rich." It is due to putting much of their wealth into tax-free municipal bonds or other tax-exempt securities. So whether income tax rates are high or low, on rich or poor, makes little difference to them.

 One of the major purposes of tax cuts is to get people to take their money out of tax-free securities and invest that money in something that will increase economic activity and create jobs. Since our income tax system is steeply graduated, any across-the-board tax cut will immediately benefit most those who pay most of the taxes -- which is to say, people with higher incomes.

 After Ronald Reagan's tax rate cuts in the 1980s first brought out anguished cries of "tax cuts for the rich," it turned out that the federal government collected more tax revenue than ever and that people in upper income brackets not only paid a larger amount of taxes than before, but even paid a higher share of all taxes than before.

 How could this be?

 This takes us back to slippery words and sloppy thinking. What was cut were tax rates. What went up were tax revenues. At lower tax rates, it paid to take money out of tax shelters and put it somewhere where it was more productive, both for the individual investor and for the economy as a whole.

 As the economy expanded and incomes and employment rose, tax revenues rose, despite lower rates being charged for a given income. The incomes of people in the higher brackets went up especially sharply, so the total taxes they paid also went up especially sharply -- again, despite lower tax rates.

 Much sloppy thinking about economic issues is based on reasoning as if there is a fixed amount of income, so that someone has to lose whenever someone else gains. The real test of an economic policy is whether it can produce a rising tide that lifts all boats.

 Ronald Reagan's policies did that, even while he was being denounced for "tax cuts for the rich."

 There is also a lot of sloppy thinking about what "rich" means. Income is not wealth and income taxes do not apply to wealth.

 People who have high incomes without much wealth are not rich. If they lose their jobs tomorrow, they are up the creek if they cannot find another job that pays as well. But these are the people who get hit with high income tax rates, often paying far higher rates than genuinely rich people.

 High-tax liberals like John Kerry seldom define what they mean by "rich." When they do, it is almost always expressed in terms of income, not wealth.

 The income of most Americans varies greatly over the course of their lives. Most of the people who are in the bottom 20 percent at one point are in the top 20 percent in later years.

 A family income of $100,000 a year does not make you rich. A couple earning $50,000 each probably did not start out making $50,000 each. People usually work up to their peak income after many years of effort and struggle -- and they may not be that far from retirement time, when they will have to give up that income and live on their savings and pensions.

 Most Americans are likely to become "rich" -- as defined by high-tax liberals -- at some point in their lives. So when liberal demagogues start talking about taxing "the rich," send not to know for whom the bell tolls. It tolls for thee.

http://www.townhall.com/columnists/thomassowell/ts20041022.shtml


Comments: Post a Comment

<< Home

Archives

March 2024   February 2024   January 2024   December 2023   November 2023   October 2023   September 2023   August 2023   July 2023   June 2023   May 2023   April 2023   March 2023   February 2023   January 2023   December 2022   November 2022   October 2022   September 2022   August 2022   July 2022   June 2022   May 2022   April 2022   March 2022   February 2022   January 2022   December 2021   November 2021   October 2021   September 2021   August 2021   July 2021   June 2021   May 2021   April 2021   March 2021   February 2021   January 2021   December 2020   November 2020   October 2020   September 2020   August 2020   July 2020   June 2020   May 2020   April 2020   March 2020   February 2020   January 2020   December 2019   November 2019   October 2019   September 2019   August 2019   July 2019   June 2019   May 2019   April 2019   March 2019   February 2019   January 2019   December 2018   November 2018   October 2018   September 2018   August 2018   July 2018   June 2018   May 2018   April 2018   March 2018   February 2018   January 2018   December 2017   November 2017   October 2017   September 2017   August 2017   July 2017   June 2017   May 2017   April 2017   March 2017   February 2017   January 2017   December 2016   November 2016   January 2013   October 2011   September 2011   August 2011   July 2011   June 2011   May 2011   March 2011   January 2011   December 2010   October 2010   September 2010   August 2010   July 2010   June 2010   May 2010   April 2010   March 2010   February 2010   January 2010   December 2009   November 2009   October 2009   September 2009   August 2009   July 2009   June 2009   May 2009   April 2009   March 2009   February 2009   January 2009   December 2008   November 2008   October 2008   September 2008   August 2008   July 2008   June 2008   May 2008   April 2008   March 2008   February 2008   January 2008   December 2007   November 2007   October 2007   April 2007   March 2007   February 2007   January 2007   December 2006   November 2006   October 2006   September 2006   August 2006   July 2006   June 2006   May 2006   April 2006   March 2006   February 2006   January 2006   December 2005   November 2005   October 2005   September 2005   August 2005   July 2005   June 2005   March 2005   November 2004   October 2004  

Powered by Lottery PostSyndicated RSS FeedSubscribe