Opinion> Linda Chavez> Spreading The Wealth Around

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Spreading the Wealth Around

"When you spread the wealth around, it's good for everybody," Barack Obama explained to Joe Wurzelbacher in Ohio earlier this week. But Joe the Plumber, as he has become known thanks to Wednesday night's presidential debate where his name was invoked no fewer than a half dozen times by both candidates, isn't buying it. And Wurzelbacher is right to be skeptical.

In an interview with CBS' Katie Couric after the debate, Wurzelbacher said he was worried that Obama would be the one deciding who was wealthy and, therefore, should be taxed more. Obama says only those earning more than $250,000 will see their taxes go up. But Wurzelbacher worries, "When's he going to decide that $100,000 is too much, you know? I mean, you're on a slippery slope here."

Wurzelbacher's fears are well founded. Obama was unable to name a single significant program that he would scale back when asked by debate moderate Bob Schieffer to do so. Obama will have to come up with the money to pay for some trillion dollars in new spending in his first term — including what he calls a "tax cut" but which will really be a check from those who do pay taxes to low-income Americans who already don't pay any federal income taxes.

The wealthy already pay a hugely disproportionate share of all federal income taxes. According to an analysis by the non-partisan Tax Foundation using the latest IRS figures (for 2006), taxpayers with an adjusted gross income (AGI) of $153,542 and above made up the nation's top 5 percent of earners. But this top 5 percent paid nearly 60 percent of all the income taxes collected in 2006, while earning about 37 percent of AGI. For all the talk of middle-income earners paying most of the taxes, the facts suggest otherwise. Those in the 26-50 percentiles of AGI pay about 11 percent of taxes and earn 19 percent of income.

So when Barack Obama says he wants to "spread the wealth around," what he's really talking about is redistributing wealth through the tax system by forcing higher income earners not only to pay a disproportionate share of taxes but to fund cash transfers to those earning less. Sen. Obama's proposed tax plan includes provisions for what he calls refundable "tax credits" for low-income Americans, many of whom don't pay any federal income taxes.

In other words, those who already pay no taxes would be sent a government check equal to the "credits" in Obama's plan, including 6.2 percent of income of those earning up to $8,100 and a refundable "credit" of 10 percent of mortgage interest paid by those who don't itemize.

Obviously some people think this is "fair." Obama told John McCain in the debate on Wednesday, "Well, I don't mind paying a little more." But Joe the Plumber might not feel quite the same way. As a small businessman, Wurzelbacher will likely take those earnings to invest in a bigger company — that's what he told Obama he wanted to do when he asked his original question on the campaign trail.

By growing his business, Wurzelbacher is creating wealth. And by "redistributing wealth," as Obama wants the government to do, he's actually reducing overall wealth in the economy by taking away capital from those who can invest it efficiently in direct job creation. And the real irony is that if Obama is elected and succeeds in raising taxes on the top 5 percent, he's likely to collect less tax, not more, if history is a guide.

Obama says he wants to return roughly to the tax system in place during the Clinton years. But in 1994 (after Clinton raised the top tax rate in what was the largest tax increase in history), the top 5 percent of earners paid only 48 percent of all taxes, not today's 60 percent. Even after the boom years of the late 1990s, the wealthiest 5 percent were shouldering less of the tax burden than today's wealthy, about 55 percent. And the total revenues collected from them were less than today as well.

One of the great successes of America has been the realization of people like Joe the Plumber that one day they, too, could be "rich" if they worked hard, invested, and grew their own businesses. Now Sen. Obama and the Democrats want to replace that American Dream with a fantasy that wealth is static and must be redistributed in order to ensure fairness. If Sen. Obama's plan becomes reality, it could well turn into an economic nightmare by punishing the most productive in order to reward the least productive in our society. Spreading the wealth doesn't sound all that different from Karl Marx's famous dictum: From each according to his ability to each according to his need.

Linda Chavez is the author of "An Unlikely Conservative: The Transformation of an Ex-Liberal." To find out more about Linda Chavez, visit the Creators Syndicate web page at www.creators.com.

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What occurred between 1999 and 2006 that would account for an increase in tax revenues derived from the wealthiest in light of the fact that the tax rate for dividends and capital gains was lowered?

Comment: #1
Posted by: Carl
Fri Oct 17, 2008 5:00 AM

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In Linda Chavez's column "Obama's plan to spread the wealth" she mentions that the top 5% earning over $153,542 currently pay 60% of the taxes with Bush's tax cuts intact, while under Clinton, who "raised the top tax rate in what was the largest tax increase in history", the wealthiest 5% paid only 48% of the tax burden. Hmm. Then according to Chavez, the higher their tax rate, the smaller their portion of taxes, so why aren't the super rich begging for higher tax rates?
Perhaps it's because, under her preferred tax policies, we've had a massive redistribution of wealth moving from the poor and middle class into the coffers of the top 1% for the last eight years. This has made it possible for that group, in spite of the Bush tax cuts, to skew the figure for the top 5% up to the 60% tax "burden" figure. In a nutshell, fewer people now have lots more money.
Also note that the group of earners between $153,542 and Obama's $250,000 (most of Chavez's top 5%) would be receiving tax breaks under Obama.
Chavez's conservative tax policies have for eight years defied the laws of gravity -- they have trickled up!

Comment: #2
Posted by: Given Harrison
Fri Oct 17, 2008 8:04 AM

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Way to go Given! Sadly, most of Linda's readers just read and nod their agreement....

Its just a shame that Linda didn't think about it...but then again who wins points for being logically correct and complete when nowadays you get rewarded for having the cutest one liner!

Its kind of like all the investment professionals on television telling people to "think long term" and to "not sell but rather keep dollar costing your way into the market..." So, that is what the middle class keeps doing with their retirement funds while the top 1% are speculating by buying and selling at rapid clips; the top 1% have day trading and hedge funds...and they want us to believe that their investments create jobs!

Comment: #3
Posted by: Carl
Fri Oct 17, 2008 4:06 PM

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Ma'am; ... Wealth in a bank or holding property makes a few individuals rich, but money moving through an economy makes a lot of people wealthy. A little thing I learned from my friend Marx is that High profits means depression... Of course, that was before paper money and then, when the rich had sucked all the money out of an economy it was done. Now government can debase all the currency just by printing up more of it. Should they ggie all they pnt the rich??? If the problem is too little money in the economy it does not mean there is too little in private hands. The fact is that low wages, too few productive jobs, and too many imports that give profit here but employment abroad lead to rich people, and too many poor people. The answer is not to give all your national credit to the rich, because the problem is too little money for the poor. The answer is not even more government money for the poor. The answer is justice. ...Since the rich control our government they should pay, and then they would make certain the national treasure were not pissed away in Arabia or else where. Wealth should be taxed so it is invested well. Since property is not taxed it is a bank of wealth, but it is also the source of unequal rights... The government should act to lower the price of property with high taxes to drive it onto the block where it will serve a better purpose, -in many hands rather than few. ...If people hang onto property then they will have to pay labor to make it profitable. That is the situation we had during the great age of capital, with property cheap and labor dear. Yes, taxes ought to redistribute wealth. Taxes ought to tax inheritance, and it ought to put pressure on wealth to prove itself worthy. Mostly it should allow invention, and industry, and ingenuity to keep more wealth, and make it harder for finance to exploit people. High interests and high profits have drained the wealth for this country. Infrastrucure built at great expense has been left to rot for the taxes to maintain it. But the common man, with little of productive work and poor wages has been forced to sell all the capital of generations at a loss to stay even. He must pay the interest of his employer with short wages, and suppliment short wages with credit. So; the problem is the same as in past ages. High profits have bled this land of its productive capacity and the money to keep the economy working. In fact, it has weakened us in a dangerous age... Those with the money should be forced to support and defend their wealth. The infrastructure works for all. The military works for all. The police and courts work for all. The government should work for all, and those with the least must pay the biggest share of their income. And taxing that income forces wages down. It is wealth which should be taxed. What the poor defend with their lives and give their lives the build up ought to be made to dance, and go to pay for the defense of wealth... The wealthy cannot do it alone. They need to see that property is never free and clear. Wealth is only as useful in private hands as it serves a public purpose...We defend their rights, but they should pay their share...Thanks...Sweeney

Comment: #4
Posted by: James A, Sweeney
Sun Oct 19, 2008 3:03 PM

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Americans already know, I guess Joe the plumber lived on the moon all his life, the more you make the more taxes you pay (for the most part). He lied about buying a business because he has a tax lien and won't pay up from 2007-Deadbeat- So I intend to make all the money I want and pay my fair share like everyone else. McCain though is for the rich only like President Bush- they don't care about middle America. Look at the mess now. John McCain can't fix anything -he has never had a business or a regular job in his life. He will only help the rich. Look at Palin spending $150000.00 in new clothes. May she should sell them and give the proceeds to Joe so he may pay his taxes and then think about buying a business. Republicans want nothing to do with the middle class ,only to steal their vote.

Comment: #5
Posted by: Linda j.
Thu Oct 23, 2008 4:25 PM

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