-Caveat Lector-
Income, taxes and demagoguery
by Thomas Sowell
WHEN YOU HEAR POLITICIANS and intellectuals talking -- often
very loudly -- about "the rich," do you ever wonder who they
are talking about and how much money those "rich" people make?
And do you ever wonder why those who are making so much noise
about the rich don't just come right out and tell us what kind
of money they are talking about?
Instead, we hear about the top 10 percent or the top 5 percent.
But why so squeamish about saying how much money that represents?
There is a reason for all this noise about the rich ---- and
for all the silence about how much money is involved. Talking
about the rich is politically very useful for whipping up envy
and getting support for heavy taxes. But the incomes of most
people in the top 5 or 10 percent are a lot less than most
Americans would consider rich.
If the incomes of all the people in an American household adds
up to $72,000, that puts them in the top 10 percent of all
households. But, when a husband and wife make $36,000 apiece,
most of us would not consider them rich. Nor would we be likely
to think that putting heavy taxes on them would be a good
idea.
Any attempt to lower the taxes of such a couple is guaranteed
to bring out the noisy demagogues in Congress, denouncing "tax
cuts for the rich" because people in the top 10 percent would
benefit. But the only people whose taxes can be cut are the
people who are paying taxes -- mostly people in the upper
brackets, who are not rich.
Even the top 5 percent of households do not usually fit what
most of us would consider to be the rich. If all the incomes in
your household add up to $127,000, then you are one of those top
5 percent who are so rich that the government thinks it should be
taxing you like mad.
That's $63,500 apiece if husband and wife are both working ---- about
what mid-level civil servants would make. Or, if only one person
is working and earning the whole $127,000 alone, that is about the
average salary of a college president -- and much less than the
average income of a college athletic coach. It is nowhere in the
ball park compared to the incomes of top lawyers, corporate executives
or professional athletes.
What about the really rich people --- the ones with their own private
jets and mansions here and there? There are such people but there are
not enough of them to affect the statistics very much. Moreover,
genuinely rich people usually have tax accountants to go with their
jets and mansions, so that they can keep their jets and mansions.
The people who really get hit hard by taxes that are supposed to be
aking the rich are ordinary people who happen to be at the stage of
their lives where they are earning more than they did in years past
and more than they will be earning in the future. These are largely
people in their 50s or early 60s who have worked their way up to a
decent income and are seeing much of it drained away by politicians
who proclaim that "the rich" ought to pay "their fair share."
This "fair share" is as completely undefined as "the rich" themselves.
The demagogues don't dare talk specifics in either case or people
will start to see through them.
If we look at wealth instead of income, it becomes even more obvious
that "the rich" are not a different class of people but largely
people in older age brackets who have accumulated some money in a
pension fund, paid off most of their mortgage and put a little money
aside to see them through retirement and the illnesses of old age.
The average net worth of households headed by someone 65 years old
or older is more than 10 times the net worth of households headed
by someone under 35 years of age. But these aren't different classes
of people, because everyone who is 65 or older was once 35 or younger.
Many of the statistical "poor" are just as fictitious as the
statistical "rich." For most Americans, being in the bottom 20
percent of the income distribution is strictly a transitional
phase. More of them rise to the top 20 percent than remain at
the bottom, and the rest of them are scattered all in between.
Most Americans are likely to have incomes in the top 10 percent at
some point or other during their lives. So when politicians start
talking about taxing the rich, send not to know for whom the bell
tolls. It tolls for thee.
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