Are the Rich Overtaxed?
|January 22, 2003||Posted by Staff under The Progress Report|
Where Bush’s Economic Plan Fails
Are the Rich Overtaxed?
Most of the talk that you hear about tax cuts and tax burdens is just political propaganda worth nothing. We need to settle more basic questions, such as, what deserves to be taxed in the first place? What is earned and what is not? In this article, Todd Altman takes a look at the real issues that the politicians avoid.
by Todd Altman
January 16, 2003
Earlier this month President Bush announced his latest plan to stimulate the American economy. Not surprisingly, the AFL-CIO, the Center on Budget and Policy Priorities, Citizens for Tax Justice, the Democratic National Committee, and United for a Fair Economy have all criticized this plan as being little more than a tax cut for the rich in sheep’s clothing.
Those who defend tax cuts of this sort typically deflect accusations of unfairness by arguing that the rich are more entitled to a tax cut since they pay more in taxes. Now, there is no disputing that the rich do, indeed, shoulder the bulk of the tax burden. The question is whether this burden is fair or not.
As on many other issues, I find myself partly at odds with both sides of this age-old debate. On the one hand, right-wingers cling to the overly simplistic notion that virtually all vast fortunes are earned; on the other hand, left-wingers cling to the equally simplistic notion that virtually all vast fortunes are unearned. I believe the truth lies between these two extremes, and so regard both groups as erring in opposite directions.
There are of course countless examples all around us of people who accumulate wealth by providing desired goods and/or services to consumers. To the extent accumulations of wealth are thusly obtained, they are undoubtedly earned. When left-wingers blindly insist otherwise, they reveal what perhaps began as a reasonable-sounding critique of crony capitalism to be little more than a thinly-veiled expression of sheer envy.
Whenever right-wingers attempt to point this out, however, they tend to overstate their case by downplaying (or ignoring altogether) the complex mixture of honest effort and privilege-seeking that gives rise to vast concentrations of wealth.
For instance, how many in the top 1% are wealthy, not because they work that much harder than everyone else, but because of the $93 billion Congress spends each year on corporate welfare?
How many in the top 1% are wealthy due to a patent they were awarded for a prescription drug that was developed — not with their money — but with taxpayers’ money?
How many in the top 1% are wealthy because they have been granted the monopolistic power to create our entire money supply out of nothing, loan it into circulation, and then charge everyone compound interest on it?
How many in the top 1% are wealthy because they were granted exclusive access rights to the media airwaves, and are thereby able to charge others ridiculously high fees for mere access to that which neither they nor anyone else produced?
How many in the top 1% are wealthy because they were granted royalty rights to natural resources like oil or mineral deposits, and so are able to demand payment for the extraction of that which was provided — not by them — but by nature?
How many in the top 1% are wealthy, not because of the value of their labor or capital, but because of the value of the land to which they hold title — a value reflective of services they did nothing to provide?
I suspect this is why many people are instinctively skeptical of the claim that the tax burden falls more heavily on the rich than it does the poor. It is all-too obvious that, were it not for various privileges, many of those in the top 1% would not even be rich in the first place (or not as rich). If, for instance, someone has an annual income of $1 million — half of which is due entirely to privilege — it would be absurd to bemoan the fact that he pays, say, $400 thousand in taxes. For in that case, he’s still making $100 thousand more than he should be.
Now, that’s not to say that the solution to our economic problems is simply to tax the rich more and everyone else less; nor is it to say that there’s anything wrong with being wealthy. The point is that the top 1% are not nearly as deserving of a tax cut as right-wingers insist they are, and that what we tax is far more important than who we tax.
Single-taxers believe that the earned incomes of labor and capital should be exempt from taxation, and that all public revenue should be derived solely from the rental value of land. Any reform that attempts merely to rearrange the taxation of labor and capital is doomed to fail. President Bush’s tax scheme is no exception.
Todd Altman is an Air Force veteran, has a bachelors degree from the University of Maryland, and is the author of the Geolibertarian FAQ.
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