Rich People Are Our Friends

The New York Times has been running a long and silly class warfare series which is basically a rehashing of arguments that go back 20 years or more: Rich = evil, poor = good, and our economic goals should be to make everyone equal. There's another word for that type of approach...socialism. More leftist nonsense that deserves to be ignored.

Larry Kudlow decided to take on some of the assertions the Times made about the very rich in a piece today on RealClearPolitics.com:

It is impossible that the Bush tax cuts of June 2003 contributed to relatively lower tax payments by the very richest Americans in 2002. But New York Times writer David Cay Johnston conveniently avoids this fact in his Sunday front-page article, “Richest Leaving Even the Rich Far Behind,” which used tax-payment data that ended in 2002 to extend the class-warfare argument. Is this just more garden-variety Bush-bashing from the newspaper of record?

I’d also like to know why Johnston never mentions the fact that the wealthiest Americans suffered the most in the stock market plunge and asset deflation of 2000-02. One reason the richest seemed to pay less in taxes during this period is that they were the hardest hit during the deflation.

Johnston singles out the top 145,000 taxpayers who comprise the top 0.1 percent of income distribution in 2002. Their average income was $3 million, two-and-a-half times the inflation-adjusted $1.2 million that the group reported in 1980. My gosh -- how dare they be successful earners and investors?

Over that 22-year span, this group probably included the very same people who launched tens of thousands of new companies that hired roughly 40 million net new workers that completely revolutionized the U.S. economy through unbelievable breakthroughs in the realms of information technology, communications, finance, health care, and retailing.

Should we go out and shoot these 145,000 for their success?

These entrepreneurs use their God-given talents within the Reaganesque free-market framework that deregulated, slashed tax rates, and provided the first strong dose of economic incentives since the 1920s. A rising economic tide over the last 20 years has lifted living standards, productivity, and employment throughout America. Everyone got richer, with a full $39 trillion in new wealth created during this period. That’s why the unemployment rate has been averaging 5 percent over the past 10 years, with non-financial productivity running about 5 percent and inflation virtually nil.

Kudlow included some revealing tax information for all of those who think the rich are not paying their fair share:

There’s nothing new here. Through 2001, a tiny one-tenth of 1 percent of U.S. taxpayers generated a hefty 16 percent of total tax collections. That’s brainpower plus initiative, aided and abetted by the incentive to keep more of what you earn and thus work with more intensity and purpose. Meanwhile the top 1 percent paid 34 percent of tax collections, the top 5 percent paid 53 percent, the top 10 percent paid 65 percent, the top 25 percent paid 83 percent, and the top 50 percent paid 96 percent. These “rich people” are government’s best friend.

The reality is that the folks who aren't paying their fair share are the folks in the bottom 50% of wage earners, most of whom pay nothing in Federal income taxes while at the same time benefiting from Federal expenditures such things as defense and infrastructure. I've written about this before.

And finally, the reality that wealth-leveling and redistribution through taxation is an idea which has failed everytime it's been tried:

Nations engaged in punishing the rich and leveling income and wealth through high taxes and resource redistribution have always failed. These were the goals of the socialist and communist regimes following WWII, in particular old Russia and its satellites. The size and scope of these failures, and the related deprivation of democracy and human rights, ultimately led to the downfall of communism and the rise of free-market capitalism, with its attendant privileges of free-election democracy and sweeping new human rights. This very transition is now occurring in the once darkest corners of the Middle East.

The economic failure of income- and wealth-leveling is more and more apparent today. The stagnant economies of socialist Old Europe are falling further and further behind the free-market capitalist models of the U.S. and Britain. Milton Friedman’s great 1962 book, “Capitalism and Freedom,” should be read by all inhabitants of Old Europe. He offered a way out. Twenty-odd years later, Ronald Reagan and Margaret Thatcher put Friedman’s ideas into political and economic action. The startlingly positive results are being copied by India and China, if not inevitably by France, Germany, and Italy.