Monday, December 19, 2011

Why Socialists and Populists Are Wrong About Tax Rate Inequality

Alan J. Reynolds, a leading Cato Economist writes in the December 6 edition of the Wall Street Journal, "A recent report of the Congressional Budget Office (CBO) says that income of the top 1% grew from about 9% in 1979 to 17.3% in 2007. Why did the report stop at 2007? The CBO didn't say, although its report briefly acknowledged that 'high income taxpayers had especially large declines in adjusted gross incomes between 2007and 2009'.

No kidding. (Didn't most of us. My comment) Once these two years are brought into the picture, the share of the after-tax income of the top 1% fell to 11.3% in 2009 from the 17.3% that the CBO reported for 2007.

The larger truth is that recessions always destroy wealth and small business incomes at the top. Perhaps those who obsess over income shares should welcome stock market crashes and deep recessions because such calamities invariably reduce 'inequality'. Of course, the same recessions also increase poverty and unemployment.

If Congress raises top rates on capital gains and dividends,the highest income earners would report less income from capital gains and dividends and hold more tax-exempt bonds. Such tax policies would reduce the share of reported income of the top earners almost as effectively as the recession the policies would likely provoke. The top 1% would then pay a much smaller portion of Federal income taxes, just like they did in 1979 And the other 99% would pay more."

The Obama regime, in which our own Ray Lahood is a major player, is out to destroy the wealthy and dole out money in a more egalitarian manner. At the same time creating a fear in all small businesses and investors as to their fate and the fate of the unemployed and the fate of the economy.

If even some of the Democrats (evidently some have) haven't figured it out yet, Obama is a long term destroyer of this country as Casto and Chavez are destroyers while increasing their own power and the power of those whose destiny is tied to the success of these despots.

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