The rich have been oppressed long enough

The Report of the Bowles-Simpson Deficit Reduction Commission is another eloquent Ode to Bipartisanship of our Most Bipartisan of Presidents. The problem is that the two parties whose views are being reconciled appear to be the Selfishly Wealthy and the Ruthlessly Reactionary.

Everyone has heard of the regressive cuts the Commission proposes to Social Security, Medicare and so forth. Less well known is how the plan will reduce the contribution of the wealthy.

The Tax Policy Center of the Urban Institute and Brookings Institution has a useful chart on how the Commission plans to give the wealthy a break, evidently to soothe their feelings for all the bashing they’ve received over the TARP bailouts and the Bush Tax Cuts. All others will have to pay for the drunken spending of the Bush era.

The following projections are from Table T10-247 of November 15, 2010.

First we look at how the after tax income will decrease (for 4 groups) or increase (for one) if their plan is enacted:

Cash Income Percentile

Percent Change in
After Tax Income

Lowest Quintile

-2.7

Second Quintile

-2.7

Middle Quintile

-1.6

Fourth Quintile

-0.2

Top Quintile

0.8

Well, there’s some good news. The wealthiest will be better off after their plan takes effect. I doubt there is a person in this country who would deny the wealthy need more money and that the poor ought to pay for it. It is the poor after all who bring down the average wealth of the country. It’s time to make them pay for that.

Now let’s take a look at how the income taxes of each of these groups will change. Four groups will have their taxes increase. One will have theirs decrease. Let’s see if we can guess which is which.

Can’t tell? Well let’s take a look:

Cash Income Percentile

Percent Change in
Federal Taxes

Lowest Quintile

47

Second Quintile

19.1

Middle Quintile

6.7

Fourth Quintile

0.5

Top Quintile

-1.9

Wow. The very wealthy have gotten a break again! It’s like they got one of those “Won Beauty Contest. Collect $15” cards from the Community Chest.

And finally, let’s take a look at how the average tax rates will change among these groups. NOTE: this is average not marginal rates. The table shows the percentage increase (in four groups) and decrease (in one group) of the rates:

Cash Income Percentile

Percent Change in
Federal Taxes

Lowest Quintile

2.6

Second Quintile

2.4

Middle Quintile

1.3

Fourth Quintile

0.1

Top Quintile

-0.6

I did not see that coming, did you? The very wealthy achieve a perfect hat-trick.

The Bowles-Simpson Report epitomizes the approach to social responsibility we have lived under for the past 40 years. It’s as American as “The Rich Get Richer.” And income and wealth disparity keep widening. I wonder if anyone has every considered whether this is good for society.

Luckily someone as insightful and amoral as Bowles and Simpson has provided the lack of intellectual honesty behind this approach: Ayn Rand.

Some day they are going to have to put her face on some issue of US currency. I suggest the $10,000 bill. After all the guy on there now–Salmon Chase, Secretary of Treasury under Abraham Lincoln–presided over the first national income tax. For that, he certainly deserves to be forgotten by those of us lucky enough to be living in more enlightened times.

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  1. December 3rd, 2010

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