October 22, 2009

Income Redistribution and the IRS

Posted in media coverage, states' rights, taxes, U.S. Economy tagged , , , , , , , , , , at 4:56 pm by realitytax

The non-partisan Center on Budget and Priority Policy, a research group forcused on federal and state fiscal policies, looked at IRS data and stated in September that:

“Two-thirds of the nation’s total income gains from 2002 to 2007 flowed to the top 1 percent of U.S. households, and that top 1 percent held a larger share of income in 2007 than at any time since 1928, according to an analysis of newly released IRS data by economists Thomas Piketty and Emmanuel Saez.”

In fact, with the exception of a slight reversal that correlates with the Bill Clinton presidency, the chart of this IRS data, reproduced below, reveals an obvious trend in favor of the wealthy.

any economic class warfare in the past century has clearly been dominated by the wealthiest Americans.

Class Warfare?

In point of fact, Piketty and Saez relied on several different income concepts and each naturally results in slightly different estimates of the share of income going to each group, so the Center on Budget and Priority Policy conclusion that the share of the nation’s income flowing to the top earning households increased from 16.9% in 2002 to 23.5% in 2007 could have “quibble room.” Yet the fact remains that change represents a larger share than at any point since 1928.

I strongly urge you to read the entire article, and abandon any sense that the wealthy in America are either paying a disproportionate share of their income(s) or losing some mythical class warfare when people talk about income redistribution or raising taxes.

Taxation without representation

It’s lately become fashionable in certain circles to cite the American Revolution as an anti-tax movement. Nothing could be more misleading, and I suspect many of those who rely on the tea bag as a new rallying symbol neither drink tea nor are conversant with either the series of tax changes, such as the molasses tax (6p/gallon,) which contributed to the uprising against taxation without representation or with the impact of the choice to drink tea over coffee.

Surely many of those who opine that they, “don’t want our government to do anything at all,” and argue in favor of states’ rights, etc., do, in fact, prefer having national immigration laws (and agents to enforce them,) a standing army to provide for the common defense, and even publicly built and maintained highways over the free-market alternative as practiced in present-day Somalia. Yet there’s more to their position than simply a media-distorted, sound-bite-fed outcry being exploited for ratings and ad revenues.

The collective American psyche places great stock in the notion of fair play. Some take it so far that they want the U.S. to be the world arbiter of justice, and accordingly encourage the notion that it’s somehow an American responsibility to prevent piracy on the high seas (the ultimate free-market exercise) or to remove regimes from power in other countries if they don’t believe that leader assumed power fairly.

State budgets are under assault

The American Dream is under assault. There is no free lunch. Taxation to accomplish the legitimate goals of federal and state government initiatives must be fairly distributed. Defining the necessary changes to tax codes is a daunting prospect even if it’s separated pragmatically from debating the role of government to expedite resolving budget crises. But considering higher taxes on the wealthy hardly constitutes class warfare, let alone an unfair burden.

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