Tapsearch Com EditorIs your top side heavy?
September 11th 2007 00:25
I'm no economics expert, but this Slate article seems ridiculously misguided. It argues that the rich are getting an increasing proportion of the income (they are), then says:
As far as taxes go, this is right. If you give $100 to a rich person as opposed to a poor person, he'll fork over more of it to the government because he's in a higher tax bracket.
But as Bruce Bartlett recently showed, and as I noted while guest-blogging for Jeremy Lott, the rich actually spend a lower proportion of their income than the poor do, even if they spend more in absolute dollars. So as far as consumer expenditures and consumption (the main focus of the Slate article) go, a poor person will use more of a $100 bill than a rich person will. So if the rich are getting a disproportionate share of the economy's growth (again, they are), that's not "good" for spending.
Of course, this whole thing is an exercise in absurdity. Having determined the poor will spend more than the rich will, what are we going to do, have the government steal the money from the rich, who already pay more in taxes? The very poorest people already get more back in taxes than they pay. And if we increase taxes, we reduce the incentives for growing the economy, so rich people will work less hard. The economic gains won't be around for us to whine about.
It's really a pointless discussion in a capitalistic system.
Given the top-heaviness of the economy, one could make the case—one could, but I'm not—that the continuing upward redistribution of income is good for the economy and good for all of us. As they earn more, and keep more of their income, the rich and the very rich spend more, thus keeping the growing number of residents of Richistan gainfully employed. The fact that the rich are getting richer is one of the reasons that federal tax revenues—which are much less progressive than they were in 2000 but still somewhat progressive—are growing so smartly, up 7.4 percent year over year.
As far as taxes go, this is right. If you give $100 to a rich person as opposed to a poor person, he'll fork over more of it to the government because he's in a higher tax bracket.
But as Bruce Bartlett recently showed, and as I noted while guest-blogging for Jeremy Lott, the rich actually spend a lower proportion of their income than the poor do, even if they spend more in absolute dollars. So as far as consumer expenditures and consumption (the main focus of the Slate article) go, a poor person will use more of a $100 bill than a rich person will. So if the rich are getting a disproportionate share of the economy's growth (again, they are), that's not "good" for spending.
Of course, this whole thing is an exercise in absurdity. Having determined the poor will spend more than the rich will, what are we going to do, have the government steal the money from the rich, who already pay more in taxes? The very poorest people already get more back in taxes than they pay. And if we increase taxes, we reduce the incentives for growing the economy, so rich people will work less hard. The economic gains won't be around for us to whine about.
It's really a pointless discussion in a capitalistic system.
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