Letter to Uncle T: Tax cuts reduce revenue

(This was an email from 5/15/2006. I'm posting it now because it still holds true.)

Uncle T.,

You'll like this link to Rush's site. It's about how cutting taxes "works every time it is tried" to raise revenue. You'll especially like the pie charts.

The only thing missing are the corresponding pie charts showing how much wealth in America is owned by the top 5, 10, 20 and 50%. That way, we could compare levels of wealth to the amount of tax paid.

For example, in 1998, the top 1% owned 38.1% of all household wealth -- that's an average net household worth (minus debts) of $10.2 million. In the 22 years between 1976 and 1998, the share of the nation's private wealth held by the top 1% nearly doubled, going from 22% to 38%.

In 1998, the top 5% owned 59% of all wealth; the top 10% owned 71%; and the top 20% owned 83%. In 1998, the bottom 20% basically had zero wealth: they either had no assets, or their debts exceeded their assets. In 2001, the top 1% owned 33.4% of all privately held wealth. In 2001, the top 20% altogether had 84% of all wealth, leaving only 16% of the wealth for the bottom 80%!

As for income, I found figures from 2000, when the top 20% received 50.4% of all national income. Rush quotes a stat from 2002, when the top 25% earned 64.86% of all income.

Compare this to Rush's 2003 tax data: The top 1% of income earners paid 34.27% of all taxes; the top 5% paid 54.36%; and the top 10% paid 65.84%.

If you've read "Perfectly Legal," you know the problem of measuring wealth vs. income. Measuring wealth is better, because the rich, thanks to the tax system designed by and for them, the IRS that audits more returns of the working poor than the very rich, and million-dollar tax lawyers inventing shelters for them, often earn very little "income" for tax purposes. Moreoever, Americans with normal incomes can still have little or no wealth because of debts -- in fact, 20% of Americans have negative wealth. The point is that we should tax wealth, not income. The wealth of the super-rich goes untaxed. That's the whole problem! Among industrialized nations, the US has the highest concentration of individual wealth -- roughly 3 times that of the No. 2 nation, Germany.

So... assuming things didn't change much between 1998 and 2003, it seems only fair that the top 10%, for example, should pay at least 70% of the taxes, an amount closer to their % of national wealth. Don't you agree?

Sources:
http://www.faireconomy.org/research/Economic_Apartheid_Data.html
http://multinationalmonitor.org/mm2003/03may/may03interviewswolff.html
http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
http://www.osjspm.org/101_wealth.htm


The other thing Rush doesn't mention, of course, is that although we had a revenue surplus in April, we're still running a huge deficit. How many more months of surpluses do we need to eliminate the deficit? Rush is silent on that one.

Now here's my favorite! (Source: http://www.huppi.com/kangaroo/4Inequality.htm )

"Tax progressivity was highest in the decades after World War II, when the rich were taxed a stratospheric 88 percent for nearly two decades. This was also an era in which the U.S. economy was a juggernaut, and the American Dream was indisputably alive and well. Because of this, most economists do not believe that high tax rates on the rich are bad for the economy.

"Personal income tax rate for top bracket:

Years Percent
1945 91%
1946-63 88
1964-81 70
1981-86 50
1988 28
1991 31"