Is Don Luskin Really So Full of It? He Claims the Rich Have Gotten Poorer

[Composed Thinker]

He claims the rich have actually gotten poorer.

THE RICH GET POORER As leftist rhetoric continues to assert on an almost daily basis that the current federal government deficit is the result of tax cuts for "the rich" that have hardly even taken effect yet, new statistical data from the Internal Revenue Service helps reveal the truth. Our friend Bruce Bartlett <http://www.trendmacro.com/talkingpoints/> points out that the new data on tax-year 2001 (here <http://www.irs.ustreas.gov/pub/irs-soi/01in01ts.xls> and here <http://www.irs.ustreas.gov/pub/irs-soi/01in03ts.xls>) reveals that the aggregate income of the top 1% of taxpayers fell by $243 billion, reducing their share of total income from 20.8% to 17.5%. In other words, the rich got poorer.

And since the rich pay most of the taxes around here, overall tax receipts fell dramatically in 2001 -- and are estimated in the federal budgeting process to keep on falling in 2002 and 2003 -- hence the forecasted deficits. The chart tells the story -- tax receipts are falling while GDP has continued to rise. In fact, since the top in 2000, individual tax receipts have fallen by over 23% -- and there sure hasn't been any 23% tax cut in effect since 2000. And Social Security tax receipts continue to rise, indicating that it's not a matter of overall unemployment.

It's that the rich are suffering. Bartlett says it's "due entirely to the stock market collapse and the recession." In that environment, the annual income it took to qualify for the top 1% "fell from $313,469 to $292,913. This fall in income is what led to a decline in aggregate tax payments by this group from $367 billion to $301 billion."

Bartlett also points out that because the poorer rich have been earning less and paying less taxes, their proportion of overall tax payments has gone down -- from 37.4% to 33.9%. So get ready for the leftist demagogues -- they'll say this means that the rich aren't paying their fair share of taxes any more. But Bartlett calculates that, in fact, the top 1% paid a slightly higher tax rate on their diminished income than they had paid on their higher income the year before (27.50% in 2001 to 27.45% in 2000).


You have to go to the page to get the graph: http://www.poorandstupid.com/chronicle.asp

[Composed Thinker]

1. BUMP

[screaming_meme]

2. Who do you believe? Krugman or Luskin?

One's a MIT Ph.D, the other is a college dropout who works on Wall Street. I'll take Doctor Krugman's analysis, thanks.

[Composed Thinker]

4. I have full faith in Krugman

He's not always free from errors; he is, after all, human. But on the mere credibility issue alone, he blows Luskin out of the water.

I'm working my butt off to get into Princeton for graduate school so that one day, I can be instructed by Krugman. Maybe it won't happen, but wouldn't it be cool if it did?

[sangh0]

3. Sophistry

They are purposely confusing wealth with income.

[BurtWorm]

5. Poorer in spirit, maybe.

[pw]

6. Has he ever heard of capital gains?

When the market goes up, and you sell stock for more than you paid for it, that's income. When the market goes down and you sell it for less, that's a loss. Does it make a difference in how many houses you can afford to buy next year? Sure. Does it make you poorer in any meaningful sense? No.

Another luxury the rich have is the luxury of deciding when to sell stock, how much to give to charity, when to buy or sell houses, all to manipulate their reported income.