Rich Getting Richer ~ Poor Getting Poorer

From a discussion elsewhere

Okay, let's move on. Another point that needs setting straight is when Jen says "the rich are getting richer and the poor are getting poorer." Again, these bumper-sticker slogans are great if one just wishes to construct false claims for the express purpose of rejecting one political party for another. This phrase may seem right, like one I hear all the time, "the New Testament has been changed over the past 2,000-years," it has a ring of truth to it. . . but just like the political statement that preceded it, when one studies the facts, it just doesn't hold any water.

The Top 50% pay 96.54% of All Income Taxes

(The top 1% pay more than a third: 34.27%)

October 4, 2005

This is the latest data for calendar year 2003 just released in October 2005 by the Internal Revenue Service. The share of total income taxes paid by the top 1% of wage earners rose to 34.27% from 33.71% in 2002. Their income share (not just wages) rose from 16.12% to 16.77%. However, their average tax rate actually dropped from 27.25% down to 24.31%

*Data covers calendar year 2003, not fiscal year 2003
- and includes all income, not just wages, excluding Social Security

Think of it this way: less than 3-1/2 dollars out of every $100 paid in income taxes in the United States is paid by someone in the bottom 50% of wage earners. Are the top half millionaires? Noooo, more like "thousandaires." The top 50% were those individuals or couples filing jointly who earned $29,019 and up in 2003. (The top 1% earned $295,495-plus.) Americans who want to are continuing to improve their lives, and those who don't want to, aren't. Here are the wage earners in each category and the percentages they pay:

The top 1% pay over a third, 34.27% of all income taxes. (Up from 2003: 33.71%) The top 5% pay 54.36% of all income taxes (Up from 2002: 53.80%). The top 10% pay 65.84% (Up from 2002: 65.73%). The top 25% pay 83.88% (Down from 2002: 83.90%). The top 50% pay 96.54% (Up from 2002: 96.50%). The bottom 50%? They pay a paltry 3.46% of all income taxes (Down from 2002: 3.50%). The top 1% is paying nearly ten times the federal income taxes than the bottom 50%! And who earns what? The top 1% earns 16.77% of all income (2002: 16.12%). The top 5% earns 31.18% of all the income (2002: 30.55%). The top 10% earns 42.36% of all the income (2002: 41.77%); the top 25% earns 64.86% of all the income (2002: 64.37%) , and the top 50% earns 86.01% (2002: 85.77%) of all the income.

The Rich Earned Their Dough, They Didn't Inherit It (Except Ted Kennedy)

The bottom 50% is paying a tiny bit of the taxes, so you can't give them much of a tax cut by definition. Yet these are the people to whom the Democrats claim to want to give tax cuts. Remember this the next time you hear the "tax cuts for the rich" business. Understand that the so-called rich are about the only ones paying taxes anymore.

I had a conversation with a woman who identified herself as Misty on Wednesday. She claimed to be an accountant, yet she seemed unaware of the Alternative Minimum Tax, which now ensures that everyone pays some taxes. AP reports that the AMT, "designed in 1969 to ensure 155 wealthy people paid some tax," will hit "about 2.6 million of us this year and 36 million by 2010." That's because the tax isn't indexed for inflation! If your salary today would've made you mega-rich in '69, that's how you're taxed.

Misty tried the old line that all wealth is inherited. Not true. John Weicher, as a senior fellow at the Hudson Institute and a visiting scholar at the Federal Reserve Bank, wrote in his February 13, 1997 Washington Post Op-Ed, "Most of the rich have earned their wealth... Looking at the Fortune 400, quite a few even of the very richest people came from a standing start, while others inherited a small business and turned it into a giant corporation." What's happening here is not that "the rich are getting richer and the poor are getting poorer." The numbers prove it.

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Dear Chris

(from: Dinesh D'Souza, Letters to a Young Conservative, Basic Books; New York: N. Y. [2002], pp. 85-87. (Any bold text is emphasis I added.)

So, you ask, does wanting to get rich make you a bad guy? Of course not. Indeed, I would go further: The rich are in the best position to be the good guys, because only the rich have the resources to really help those who are in need. Still, despite the philanthropic advantages conferred by wealth, I am not at all surprised that your roommate is outraged by your desire to make money. Your roommate apparently believes that rich people are evil because they make money and that the government is good because it takes away some of that money. Not that liberals would put it that way. They would say that the government's job is to promote equality by redistributing resources from the rich to the poor. In my last letter, I tried to argue that this attempt is wrong-headed; here, let me argue that it is unnecessary. Indeed, I intend to show that technological capitalism - not government - is the catalyst for equality. You can consider this letter a kind of extended postscript to my previous critique of Big Government.

Whenever a Republican - be it Reagan or George W. Bush - proposes a tax cut, the liberals say, "This tax cut will mostly help the rich. " Of course tax cuts help the rich the most; the rich in this country pay most of the taxes. I wonder how many Americans know that the top 10 percent of income earners in America pay two-thirds of all income taxes. Meanwhile, the bottom 50 percent of income earners pay less than 5 percent of the income taxes. These statistics, which I got from the Internal Revenue Service, are of obvious relevance in determining who is going to benefit most from virtually any proposal to reduce income tax rates.

Thus if the rich guy makes $250,000 and pays $100,000 in taxes, and the (relatively) poor guy makes $40,000 and pays $5,000 in taxes, a ten percent across-the-board tax cut will cut the rich guy's taxes by $10,000 and the poor guys taxes by $500. This provokes the liberal wail, "But the rich guy is getting twenty times more than the poor guy." One does not have to be a math major to figure out that it is not even possible to cut the poor guy’s taxes by $10,000 because he pays only $5,000 in the first place. Contrary to liberal demagoguery, proportional tax cuts are just because they benefit citizens in proportion to what they have been paying in taxes.

Liberals usually oppose tax cuts and advocate higher taxes for the rich because they are convinced, as the old liberal mantra has it, that "the rich get richer while the poor get poorer." But is this really true? For the past half century, and especially for the past two decades, it has not been true in America. In reality, the rich have grown richer, and the poor have also grown richer, but not at the same pace.

Let me explain. In 1980, when Reagan was elected, America was a much more egalitarian society. According to the Census Bureau, if one earned $55,000 that year, one was in the top 5 percent of earners in the United States. That sounds amazing, but it’s true. Now, taking inflation into account, $55,000 in 1980 equals something like $75,000 today. But today if you want to be in the top 5 percent of income earners, you have to make $155,000.

What this means is that lots of people who use to be in the middle-class, or the lower middle class, have moved up. In moving up, they have increased the economic distance between themselves and the rest of the population. So, inequality is greater. But the exclusive liberal focus on inequality misses the larger picture, which shows that more and more people are moving into the ranks of the affluent class.