A news report last week said the group projected that about 47 percent of American households pay no federal income taxes at all.

If half aren’t paying, that means the other half is paying for everyone. It is a sign of how both the tax system and the economy as a whole have become seriously out of joint.

via Galloping inequality: Rutland Herald Online.

What do you know?  Up until this point in the Herald editorial, I am in agreement with the editors.  The agreement is short-lived.

Among those 47 percent are people with wages too low to face any tax liability at all. Also, in recent years exemptions and credits have expanded up into the middle class so that a family of four earning $50,000 may pay nothing. Then there are wealthy people who exploit all the exemptions, credits, shelters and write-offs that have been designed to protect them. Thus, billionaire Warren Buffet has complained that his secretary pays just as much income tax as he does.

This is also fairly innocuous and agreeable.  However, including “billionaire Warren Buffet” as complaining indicates where they are headed next.

The expansion of tax cuts and exemptions for low- and middle-income workers is a response to the vast expansion of economic inequality in America in the past 30 years.

Ding, ding, ding!  Expansion of economic inequality.  As though the phrase itself has a transcendent meaning of its own describing a moral truth that center-right voters need constant badgering on and “scumbag conservatives” have yet to discover at all.

Are income unequal in America?  Yes, no one can deny that.  Are incomes static in the United States?  No, and that is never mentioned when talking about these so-called “economic inequalities”.  Thomas Sowell covers it more adequately than I ever could in his book, Economic Facts and Fallacies, but let me give it a whirl.

Studies revealing an ever increasing gap in income among Americans never take into account that individuals (or families) who started off in the lowest bracket may have moved themselves up a few brackets by the time the next study is run.  Sowell has the numbers, but a large portion of those in the bottom bracket find themselves moving up the scale and comparing the snapshot of two separate studies fails to take that into account.  It does, however, fit the template for decrying capitalism and heralding socialism (or whatever it is liberals call it these days).

The following quote from the editorial proves the point (they are using an essay by Tony Judt from the New York Review of Books to support their arguments):

Since 1973 inequality in take-home pay increased in the United States and Britain more rapidly than in any Western nation. In 1965 [sic] the CEO of General Motors earned 66 times the pay earned by the typical GM worker. Today the CEO of Walmart earns 900 times the wages of the average employee. One sign of the degree to which the United States has become economically stratified: The wealth of the family of the founder of Wal-Mart in 2005 equaled the wealth of the bottom 40 percent of Americans.

See?  In 1968 the CEO made 66 times the “typical” GM worker (for all we know they have included the lowest paid mail clerk in their calculation of the typical worker).  Today the CEO of Wal-Mart makes 900 times the wages of the average employee (again, who is included in the “average” employee group, mid-level execs making $200,000, or more per year – Obama’s definition of rich, by the way).

Do you see what they do here?  In 1968 it’s 66 times the “typical” worker.  In 2010 it’s 900 times the “average” employee.  We are supposed to read those two numbers and be shocked with righteous indignation.  But how many of the workers from 1965 are still making what they made then (if they’re still working)?  Or, if you prefer, compare the amenities of the 1968 worker with the 2010 worker.  I’ll bet most of us would chose the 2010 amenities over the 1968 amenities (even if the cars were cooler in the ’60s).

Additionally, there is an assumption by many who bemoan the “economic inequality” that there is some sort of cap on total income possible.  For example, 100 people working may only have access to $100,000 therefore the right thing to do would be to pay everyone $1,000 so everyone is equal.  But that isn’t how it works with capitalism.  There is no ceiling on what can be earned and creating wealth ultimately leads an ever increasing pie from which to slice the various incomes.

Those who defend the status quo say that the rich are already paying a high proportion of tax revenues. But that’s because they have secured for themselves a high proportion of the nation’s income. In 2005, the top 1 percent of wage earners took in 21.1 percent of the national income.

How much of the national income tax did the same group supply?  According to National Taxpayer’s Union, the answer is 39.38 percent.  But the Herald won’t bother to point that out (if they even knew), and if they did point it out they would probably find a way to spin it to make it sound like paying for nearly 40% of the federal government is not enough for the top 1% of wage earners.

Wide economic inequality has pernicious social effects. Judt’s essay is accompanied by a graph showing that social mobility — the opportunity to improve one’s lot — is far more depressed in the United States than in Poland, Canada, Germany and Scandinavia. Only the nearly impermeable class system in Britain keeps people down to the degree that economically repressive conditions in the United States do.

Okay, this is harder to dispute but only because after looking at the graphs that they reference, I didn’t see any source information.  I am not an economist, nor do I have the time or the skills to assess how the information was gathered and put together, etc.  However, speaking circumspectly, how far apart are the two poles in Scandinavia?  I suspect it would take a lot less to move from point A to point C in Sweden than it would in America.  Or, how about the effects of massive social welfare programs – as is the case in most of the above-mentioned countries – inhibiting the desire to even be upwardly mobile?  Sedate the masses with just enough opium in the form of social programs and gradually they will have no desire to live their lives freely anymore with one possible aspiration being moving up in life.

Economic inequality has other consequences. Poor health, mental illness, crime and low life expectancy closely track levels of economic inequality. The United States has by far the highest health care expenditures among a host of industrial nations but among the lowest life expectancies. Life expectancy is higher in Bosnia.

Okay, I’m dragging this out a little too long, but I’m going to finish this just because I have a computer, an internet connection, and I live in America.  Is it possible that poor health, mental illness, crime and low life expectancy is a cause, rather than an effect, of “economic inequality”?  In other words, is it possible (or reasonable) to ask the question: are these circumstances in your life because of your economic condition or are they causing your economic condition?  Or possibly, do you choose a lifestyle that leads to poor economic output?  I know, both of those questions are terribly un-politically correct.

No wonder tea partiers and leftists are both angry at the present system. They are both looking for a way to address the long-building trend that is skewing the economy toward the wealthy few. Tea partiers say we need to cut taxes, even though lower revenue would further degrade our schools and other necessary services, worsening economic inequality and closing off opportunity.

(At least the Herald refrains from using the more derogatory terms for people choosing to affiliate with the TEA party movement.)

WORLDVIEW DISAGREEMENT ALERT!

The Herald assumes that government schools are the only way to educate our kids (poor or otherwise).  The Herald assumes that government services are “necessary”.  If you accept their premise, then it makes sense to reach the conclusions that they do.  I do not accept their premise (and nor should you!).  In fact, I would argue that much of this bemoaned “economic inequality” has been exacerbated (or even caused) by the very institutions that the Herald claims are the only way to salvation for those of initially poorer means.

(Last paragraph, I promise.)

The tax and social policy of the Obama administration is designed to close the income gap. President Obama’s health care bill has been described as one of the great economic equalizers of recent decades. The billionaires who have impoverished the public sector by scarfing up resources and closing off opportunity for the many must be laughing at tea partiers so eager to impoverish their own world in order to gild the already gilded world of the few.

Ha!  Obama’s tax and social policy are designed to do something, but I don’t think that he really cares about closing the income gap.  At the end of Obama’s policies, all we’re really going to end up with is a power gap.  I know I don’t listen to many Left-leaning commentators, but I haven’t heard anyone tout the president’s health care bill as “one of the great economic equalizers of recent decades” (at least, I haven’t heard that as a good thing).

Please, please, please….tell me specifically how the billionaires are impoverishing the public sector (an by public sector do they mean, poor individuals or the government social programs that they hold so dear)?  And show me how the billionaires of the world have scarfed up all the resources.  I still have access to quite a bit of resources and I am a long way off of a billion dollars.  In fact, I have yesterday’s billionaires to thank for many of the things that I take for granted today (cars, tv, cell phones, computers, inexpensive electricity, etc.).  Your cherished government did not create those things; they did not produce those things; and they certainly didn’t just give me those things (although I’ve wondered if going on welfare might help me to procure the latest models).

If you’ve made it this far, bravo (or should I say, “Why have you wasted your time?”)  Either way, I’m grateful.  Any suggestions on how to carry this message to people who consume their news casually and are easily mislead by the nincompoops on the Herald editorial board?

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