Are America’s Wealthy Unpatriotic? (+2K Views)

Lorimer Wilson March 1, 2011 Comments Off on Are America’s Wealthy Unpatriotic? (+2K Views) 3,613 Views

The Rich are NOT Paying Their Fair Share of Income Tax

Over the last half century, the richest Americans have shifted the burden of the federal individual income tax off themselves and onto everybody else – dramatically! At a time of national economic crisis, especially, they can and should contribute far more in taxes. [Let me show you the extent of this massive redistribution of wealth so you decide for yourself if this is, indeed, the case.] Words: 1140

So says Richard Wolff (www.guardian.co.uk) in an article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted and edited […] further for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Wolff goes on to say:

Highest and Lowest Income Tax Rates Have Narrowed Considerably

The first graph compares the official tax rates paid by the top and bottom income earners [over the years]. Note especially that from the end of the second world war into the early 1960s, the highest income earners paid a tax rate over 90% for many years. Today, the top earners pay a rate of only 35%. Note also how the gap between the rates paid by the richest and the poorest has narrowed. [When] we take into account the many loopholes the rich can and do use vs. the poor, the gap narrows even more. One conclusion is clear and obvious: the richest Americans have dramatically lowered their income tax burden since 1945, both absolutely and relative to the tax burdens of the middle income groups and the poor.

Consider two further points based on the above graph:

if the highest income earners today were required to pay the same rate that they paid for many years after 1945, the federal government would need far lower deficits to support the private economy through its current crisis;
those tax-the-rich years after 1945 experienced far lower unemployment and far faster economic growth than we have had for years.

The lower taxes the rich got for themselves are one reason why they have become so much richer over the last half century. Just as their tax rates started to come down from their 1960s heights, so their shares of the total national income began their rise (see here for an excellent article discussing this).

% Share of National Income by Top 1% of Earners Has Increased Considerably

As the two Wikipedia graphs below show, we have now returned to the extreme inequality of income that characterised the U.S. a century ago. The first graph shows share of national income taken by the top 1%, the top tenth of a percent, and the top 100th of a percent of individuals and families: the richest of the rich..

After-tax Incomes of the Top 1% of Households Have Risen Dramatically

The third graph below compares what happened to the after-tax household incomes of Americans from 1979 to 2005 (adjusted for inflation). The bottom fifth of poorest citizens saw their income barely rise at all. The middle fifth of income earners saw their after-tax household income rise by less than 25%. Meanwhile, the top 1 % of households saw their after-tax household incomes rise by 175%.

Richard Wolff economics graph 3

The Wealthy Perpetuate a Vicious Cycle to Their Benefit

Indeed, this cycle has been at work for years. [It works like this:]

Reduced taxes on the rich leave them with more money to influence politicians and politics.
Their influence wins them further tax reductions,
which gives them still more money to put to political use.
When the loss of tax revenue from the rich worsens already strained government budgets, the rich press politicians to cut public services and government jobs and not even debate a return to the higher taxes the rich used to pay.

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So it goes – from Washington, to Wisconsin, to New York City.

The Rich Unsuccessfully Try to Justify the Record

How do the rich justify and excuse this record? They claim that they can invest the money they save from taxes and thereby create jobs, etc. – but do they? In fact, cutting rich people’s taxes is often very bad for the rest of us (beyond the worsening inequality and hobbled government it produces). Several examples show this:

a good part of the money the rich save from taxes is then lent by them to the government (in the form of buying US Treasury securities for their personal investment portfolios). It would obviously be better for the government to tax the rich to maintain its expenditures, and thereby avoid deficits and debts. Then the government would not need to tax the rest of us to pay interest on those debts to the rich.
the richest Americans take the money they save from taxes and invest big parts of it in China, India and elsewhere. That often produces more jobs over there, fewer jobs here, and more imports of goods produced abroad. US dollars flow out to pay for those imports and so accumulate in the hands of foreign banks and foreign governments. They, in turn, lend from that wealth to the US government because it does not tax our rich, and so we get taxed to pay for the interest Washington has to give those foreign banks and governments. The largest single recipient of such interest payments today is the People’s Republic of China.
the richest Americans take the money they don’t pay in taxes and invest it in hedge funds and with stockbrokers to make profitable investments. These days, that often means speculating in oil and food, which drives up their prices, undermines economic recovery for the mass of Americans, and produces acute suffering around the globe. Those hedge funds and brokers likewise use part of the money rich people save from taxes to speculate in the US stock markets. That has recently driven stock prices higher: hence, the stock market recovery. That mostly helps – you guessed it – the richest Americans who own most of the stocks.

Conclusion

In simplest terms, the richest Americans have done by far the best over the last 30 years. They are more able to pay taxes today than they have been in many decades, and they are more able to pay than other Americans by a far wider margin. At a time of national economic crisis, especially, they can and should contribute far more in taxes.

*http://www.guardian.co.uk/commentisfree/cifamerica/2011/mar/01/us-taxation-public-finance

Editor’s Note:

The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.

Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

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