Tax Lawyer's Blog

TaxProf Paul Caron owns and operates what I like to call the New York Times of tax blogs. We mortal tax bloggers often get our lead stories from him. 

Here is yet another Caron-generated story:

The Center on Budget and Policy Priorities yesterday released Income Gaps Between Very Rich and Everyone Else More Than Tripled In Last Three Decades, New Data Show, by Arloc Sherman & Chad Stone:

The gaps in after-tax income between the richest 1% of Americans and the middle and poorest fifths of the country more than tripled between 1979 and 2007 (the period for which these data are available), according to data the Congressional Budget Office (CBO) issued last week. Taken together with prior research, the new data suggest greater income concentration at the top of the income scale than at any time since 1928.

The survey does, indeed, show, as fellow tax bloggers Jim Maule and Linda Beale are sure to point out, that the rich have gotten richer. What it does not show, and what is not to be automatically inferred from it, is that the poor and the middle-class have gotten poorer.¹

Of course, I fully expect the tax-the-rich types to suggest that very thing. But by doing so they only betray one of their many faulty premises: Namely, that wealth, like energy, is finite and an increase in one individual’s wealth is always matched by a commensurate decrease in another individual’s wealth.²

The study likewise does not show that decreased taxes on the rich are a primary, or even major cause, of increased wealth or that confiscatory taxes on the rich will somehow make the poor and the middle-class more wealthy.³

Footnote:

¹  The first graph shows the very opposite. The poor and the middle class have gotten richer along with the wealthy, they just did so at a slower rate. This illustrates nicely the problem I have with the pro-tax movement. It is envy based and seems to be focused more at bringing down the rich than it is at lifting up the poor.

Consider this hypothetical:

Assume that the above charts show that the rich lost rather than gained wealth from 1979 through 2007. Now further assume that the poor and the middle class, although they increased their wealth during that same period, did so at a slower rate than shown therein.

Because liberals choose to focus on the wealth gap rather than the increase in the actual purchasing power of the poor, this result would be more acceptable to them than the reality revealed by the CBPP study even though the poor are in the real situation better off financially than they are in the hypothetical situation.

This is the politics of envy which is epitomized by the following statement:

I’d rather have nothing and everyone else have nothing than have a little and everyone else have a lot.

²  I think it proper and useful to study the financial well-being of the poor and the middle-class, but I do not think it proper or useful to focus on whether a select few happen to be doing financially better than they. The former is legitimate economic analysis; the latter is the politics of envy.

³  I am not saying that these things cannot be proved or that some other study doesn’t purport to prove them. I am only saying that the CBPP study showing that the rich become richer does not alone prove them.

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