Published 25 February 1993 in The Carolinian (The University of North Carolina at Greensboro)
"Fair" does not mean "more," Mr. President
by Matt Wallace
During summer school, my political science instructor claimed that the wealthy had lawyers and accountants to help them avoid paying much of their income taxes. He even implied that they weren't paying at all leaving the onus of income taxation on the poor and middle class. The new Democratic administration claims that the wealthiest Americans got "unfair" tax breaks during the 1980s as a justification for increasing taxes on them now. Many people mistakenly believe these things to be true, but the facts tell a very different story.
As marginal tax rates were reduced from 70% to 28%, the effective tax rate for the wealthiest individuals moved from about 18% to almost 25%. This neat little trick was accomplished by closing loopholes that the rich used to avoid taxes thus exposing more of their income to taxation. Data from the Internal Revenue Service as reported in Individual Income Tax Returns 1988 reveals that returns with adjusted gross incomes of $100,000 or more accounted for about 2.3% of all returns and about 35.9% of all income taxes paid.
The fact that the rich pay more in taxes, both absolutely and relatively, should be intuitive. Our system of income taxation is progressive which means that higher incomes are subject to higher marginal rates of taxation. The rich have more income to tax and pay more of that income in taxes than do individuals with more modest earnings.
President Bill Clinton wants to raise "contributions" on the top 2% of taxpayers because he thinks they "should pay their fair share." These taxpayers are already paying at least a third of all income taxes. Apparently, he thinks "fair" is simply "more" than they're already paying.
Of course, the wealthy can make the proposed increased "contributions" and not be too adversely affected. They'll simply reduce the spending and saving that creates the jobs that ordinary people depend on simply to pay the bills. The fine craftsmen at Hatteras Yachts in High Point experienced this little fact of economic life in the wake of the luxury tax imposed in 1990.
This "soak the rich" attitude is typical of liberal Democrats seeking to augment their political power. They have a tradition of practicing the "politics of envy." They deceive the citizenry into believing that our problems are caused by "greedy" rich people who take too much and give too little. They promise to "protect" all of us "have-nots" from these wicked "haves" who must be made to "pay their fair share."
They and the people they delude fail to realize that confiscating wealth and destroying capital is no way to promote prosperity and to create jobs, even if it's euphemistically called "investment."
The Bush recovery is clearly under way and picking up steam. The proposed tax increases will cut off the capital needed to fuel it and will derail it. The resulting Clinton recession will be a fitting reward for those who wanted "change." Unfortunately, we all will suffer from the misguided policies of the new Democratic administration.
Matt Wallace is a Finance/Economics major from Winston-Salem, N.C.