Fomenting Class Envy with Tax Myths
Week of:
Oct. 5, 1997

F.R. Duplantier


F.R. Duplantier

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Our first 50 years . . .
Our First Fifty Years
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Many of the assertions that liberals make about tax policies are simply not true.

There's only one thing wrong with the popular belief that "the rich don't pay their fair share" in taxes: It's not true. "According to IRS data, the top 1 percent of income earners pay nearly 29 percent of the income tax burden," reports Daniel Mitchell of the Heritage Foundation, "the top 10 percent pay more than 59 percent, and the top 20 percent pay more than 74 percent. The bottom 50 percent of income earners, on the other hand, pay less than 5 percent of income taxes."

The idea that "lower tax rates mean the rich will pay less" is also a myth. "History indicates that the revenue-maximizing rate is less than 30 percent," says Mitchell. "In other words, when marginal rates are higher than 30 percent, the rich probably will pay more if rates are lower." That's because "incentives to hide, shelter, and underreport income are reduced."

Mitchell debunks the idea that "the rich get richer and the poor get poorer" when tax rates are lower. "Census bureau data show that earnings for all income classes tend to rise and fall in unison," he reports. "In other words, economic policy either generates positive results, in which case all income classes benefit, or it causes stagnation and decline, in which case all groups suffer."

Pessimism may be popular in America nowadays, but the United States is still "a land of opportunity," Mitchell insists. Those who are unsuccessful may want to believe that the deck is stacked against them, but it just isn't so. Nor was the Reagan era characterized by neglect of the poor and favoritism for the rich, as Democratic demagogues disingenuously declare. Mitchell reminds us that "the economy enjoyed its longest peacetime expansion in history" during the 1980s, a boom that benefitted the poor even more than the rich. He also points out that "average family income rose substantially when the Reagan tax cuts were in effect."

Mitchell declares that the only beneficiaries of class warfare are the demagogues who dabble in it. "When politicians adopt punitive tax policies," Mitchell warns, "the economy's performance stumbles, and the most likely victims are Americans on the lower rungs of the economic ladder."

Environmentalists like to remind us that we're all in the same boat -- or spaceship, as some of them say -- and that the impact that any one person has on the environment will be felt by all. This observation, trite though it may be, is more or less accurate, though the call for increased government regulation that typically follows it is a classic non sequitur. The vehicular metaphor for a common fate applies equally well to the economy, however, for anyone who creates wealth inevitably bestows a bounty on his shipmates. It is, and always has been, in the best interests of rich and poor to work together. Anyone who says otherwise betrays his ignorance, or his malice.

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