What would you say if I told you that a central premise of both Barack Obama's economic policy and the Occupy 'movement' was a conscious lie. OK, so Barack Obama lying isn't exactly news, but this new report from the Laffer Center at the Texas Public Policy Foundation exposes the intellectual corruption at the heart of leftist economics. Bottom Line: Income Inequality is a left wing hoax on par with Global Warming or Police Brutality.
In 2009, Barack Obama's First Budget made the following claim about Income Inequality:
For the better part of three decades, a disproportionate share of the Nation's wealth has been accumulated by the very wealthy. [Yet] instead of using the tax code to lessen these increasing wage disparities, changes in the tax code over the past eight years exacerbated them....By 2004, the wealthiest 10 percent of households held 70 percent of total wealth, and the combined net worth of the top 1 percent took home more than 22 percent of total national income, up from 10 percent in 1980. (9)As the TPPF report details, Barack Obama's budget (and various Occupy mouthpieces) based their economic assumptions on this 2003 Paper by Thomas Piketty and Emmanuel Saez. The problem is that Piketty and Saez are either lying or they committed a mistake that's so amateur it demolishes their credibility.
The short version (*) of Piketty and Saez follows: during the (relatively) low-tax 1920's, the top 1% captured 18% of national income. During the high-tax 1930's to 1970's, the top 1% took in 8% of national income. Since the 1980's and the return of a (relatively) low-tax environment, that percentage returned to 17%.
Here's the problem: Piketty and Saez measure wage income, NOT total compensation. As income taxes rise, wealthy people shift their compensation from taxable income to tax-free benefits such as Health Care and Country Club Membership. As income taxes fall, wealthy people simply shift their compensation from benefits to income. This is tax avoidance 101 type stuff. Once you measure total compensation instead of income, the total held by the top 1% holds remarkably steady over time.
Unfortunately, while confiscatory taxation does little to alter so-called economic inequality, it is devastating to the economic growth necessary for the poor and middle class to get ahead on their own. As the report, taking Piketty and Saez at face value, states:
To look at this 'stagflation" era [the 1970's], as it was derisively known at the time by those who experienced it, and top point out that income inequality was held at a low level [even though it wasn't] misses something essential. Perhaps, in this long decade of minimal growth, the eating away of savings by inflation, the effective capital-gains tax rate often over 100% and the chronic joblessness -- the top tenth did take home a third of all national income, as opposed to 45% [even though they didn't], and the top hundredth of one percent did only make 50 times average, as opposed to 400 [even though they didn't]. But it was a miserable time to be a little guy, to try and get by, let alone strive to get ahead. (11)Redistributive policies screw the little guy worst.
This report does an excellent job demonstrative that while confiscatory taxation does nothing to alter so-called inequality, it devastates the economic growth necessary for the poor and middle class to get ahead on their own. In addition, the report provides a concise history of the first fifty years of the income tax that I found indispensable. My only mild criticism is that I would prefer to have the central conclusions stated in bullet form at the beginning of the report, but that's a minor quibble. This report exposes the intellectual corruption at the heart of Obamanomics and the Occupy 'movement.' Bottom line: Income Inequality is a left-wing hoax on par with Global Warming and Police Brutality.
* I linked to the original paper for a reason; this paragraph is intended as a quick summary.
Update: The Communications director at TPPF writes to inform me that this report was done by the Laffer Center, NOT TPPF; I have update this post.