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Warren Buffett, Robber Baron Off-the-books America

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Incomes Taxes, Millionaires and Billionaires

by Christopher Chantrill
December 18, 2010 at 11:55 am

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SENATOR Chuck Schumer (D-NY) is reported to be “irked” that President Obama didn’t take his advice and use the tax bill to “corner Republicans into defending millionaires and billionaires.” In fact he’s not just irked, he’s “deeply disappointed and convinced Obama had missed a major opportunity.” You’ll remember that Schumer’s plan was to continue the Bush tax cuts for everyone except those earning more than $1 million a year.

Presumably Chuck is upset about income trends showing the income share of the very richest rising in recent years. Here is data from the IRS showing that the top one percent of federal income tax filers are reporting a modestly bigger share of GDP since the 1980s. But hey, Chuck, look at what the rich are paying in federal income taxes! That’s the red line on the chart below.

Back in 1986 the top one percent reported incomes of 6.4 percent of GDP on their tax returns. By 2007 this share had risen to 14.3 percent of GDP. But not to worry. In 1986, just before the Reagan tax simplification and rate reduction, the richest one percent paid 25.7 percent of federal income taxes. By 2007, after all the dreaded Bush tax cuts, they paid 40.4 percent of all federal incomes taxes. But then came the meltdown of 2008. The richest share of income went down, despite all those greedy bankers. And the richest one percent’s share of the income tax went down too, to 38.0 percent.

The record for the last 20 years is that income tax rates for the rich went down and the income tax share paid by the rich went up, except during recessions. So why should Sen. Schumer and our liberal friends be so determined to raise taxes on the rich?

We all know why. It’s the “inequality,” stupid. In the Reagan-Bush era, the rich got richer and the poor got poorer, and liberals like Chuck Schumer and President Obama are determined to change all that with new social programs like ObamaCare and higher taxes on the rich. Here’s why they are so concerned. The chart, from the same IRS data, shows the income reported and tax paid by the bottom 50 percent of tax filers.

The solution is obvious. Tax those greedy rich people! But, of course, the truth is not so simple. Governments are already spending staggering amounts subsidizing the lower 50 percent. The usually-reliable usgovernmentspending.com reports a trillion dollars a year in spending for government pensions, $1.1 trillion for government health care, a trillion for government education and $0.8 trillion for government welfare. If that hasn’t done the trick, year after trillion-dollar year, what on earth will? This nation is crying out for a more nuanced approach to inequality than the fundamentalist liberal approach of tax and spend.

The conservative line on inequality is that the trillions are part of the problem. Take the recent report on marriage and children authored by W. Bradford Wilcox and Elizabeth Bradford, “When Marriage Disappears.” About eight percent of the babies born to highly-educated mothers are born out of wedlock. That compares to 54 percent babies born out of wedlock to the least educated mothers, and 44 percent of babies born out of wedlock to moderately educated mothers. What is the difference between now and the good old days of the 1950s, apart from Fox News? The difference is that government at all levels pays big money to help out single mothers.

Here’s another factoid. According to the Census Bureau’s HINC-05 table on households for the Current Population Survey for 2008, the higher up the income scale you go the more people in the household are likely to be working. But over 50 percent of households in the poorest fifth are zero earner households.

That’s not the whole story. Low income households are more likely to he headed by someone over 65. In the poorest fifth, 34.3 percent of households are headed by someone over 65.

What it is that our liberal friends really want with the rich? President Obama has just agreed to extend their Bush tax rate of 35 percent, conceding the theory, advanced by supply-siders, that we need higher-income folks to use their money to grow the economy out of a recession. Yet Sen. Bernie Sanders (I-VT) has been filibustering against a tax plan that is “bailing out the richest people in America.” No doubt he wants the money for programs for people right now rather than build a future of good jobs for all.

Where do we go from here? We conservatives point to the straw of supply-side economics and boast that we can spin it into the gold of greater prosperity for all. But who will find the Rumpelstiltskin to actually do the spinning and turn the theoretical straw into electoral and then legislative gold?

Christopher Chantrill blogs at www.roadtothemiddleclass.com.

Buy his Road to the Middle Class.

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Faith & Purpose

“When we began first to preach these things, the people appeared as awakened from the sleep of ages—they seemed to see for the first time that they were responsible beings, and that a refusal to use the means appointed was a damning sin.”
Finke, Stark, The Churching of America, 1776-1990


Mutual Aid

In 1911... at least nine million of the 12 million covered by national insurance were already members of voluntary sick pay schemes. A similar proportion were also eligible for medical care.
Green, Reinventing Civil Society


Education

“We have met with families in which for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”
E. G. West, Education and the State


Living Under Law

Law being too tenuous to rely upon in [Ulster and the Scottish borderlands], people developed patterns of settling differences by personal fighting and family feuds.
Thomas Sowell, Conquests and Cultures


German Philosophy

The primary thing to keep in mind about German and Russian thought since 1800 is that it takes for granted that the Cartesian, Lockean or Humean scientific and philosophical conception of man and nature... has been shown by indisputable evidence to be inadequate. 
F.S.C. Northrop, The Meeting of East and West


Knowledge

Inquiry does not start unless there is a problem... It is the problem and its characteristics revealed by analysis which guides one first to the relevant facts and then, once the relevant facts are known, to the relevant hypotheses.
F.S.C. Northrop, The Logic of the Sciences and the Humanities


Chappies

“But I saw a man yesterday who knows a fellow who had it from a chappie that said that Urquhart had been dipping himself a bit recklessly off the deep end.”  —Freddy Arbuthnot
Dorothy L. Sayers, Strong Poison


Democratic Capitalism

I mean three systems in one: a predominantly market economy; a polity respectful of the rights of the individual to life, liberty, and the pursuit of happiness; and a system of cultural institutions moved by ideals of liberty and justice for all. In short, three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is plural and, in the largest sense, liberal.
Michael Novak, The Spirit of Democratic Capitalism


Action

The incentive that impels a man to act is always some uneasiness... But to make a man act [he must have] the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness.
Ludwig von Mises, Human Action


Churches

[In the] higher Christian churches... they saunter through the liturgy like Mohawks along a string of scaffolding who have long since forgotten their danger. If God were to blast such a service to bits, the congregation would be, I believe, genuinely shocked. But in the low churches you expect it every minute.
Annie Dillard, Holy the Firm


Conversion

“When we received Christ,” Phil added, “all of a sudden we now had a rule book to go by, and when we had problems the preacher was right there to give us the answers.”
James M. Ault, Jr., Spirit and Flesh


Living Law

The recognition and integration of extralegal property rights [in the Homestead Act] was a key element in the United States becoming the most important market economy and producer of capital in the world.
Hernando de Soto, The Mystery of Capital


presented by Christopher Chantrill

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