Economics Lesson for the Class Warfare Crowd

[sirs]

When the government taxes income, it raises the price of work compared to leisure. And because the tax code penalizes capital gains with higher rates, it also raises the price of saving and investment compared to consumption.

Yet work, production, saving and investment are how we generate national income, so it doesn't make sense to discourage taxable income with higher tax rates. This isn't some sort of modern-day revelation. Andrew Mellon, a Treasury secretary during the 1920s, noted that "the history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business."

Unlike the rest of us, the rich have a great ability to alter the timing, amount and composition of their income. That's because, according to IRS data, those with more than $1 million of adjusted gross income get only 33 percent of it from wages and salaries. The super-rich (those with income above $10 million) rely on wages and salaries for only 19 percent of their income.

[sirs]

The Obama administration talks much about sharing the wealth in its mad rush to corral the faltering economy but not much about sharing the labor that creates it. President Barack Obama embraces the strategy of “hope,” but when hope is your strategy, hope is all you get. The following numbers may indicate the frightening demographic trend that relying on hope leads to: hopelessness.

There are 311 million people in the United States and according to the U.S. Department of Commerce, 211 million of them have an income. That doesn’t sound so bad until you discover that, according to the U.S. Department of Labor, only 100.5 million of them are “full time wage and salary workers.”

There are, of course, some millions of other part-time or temporary workers but the 100.5 million represent the day-in-day-out, year-in-year-out producers of our economy.

For the first time in United States history, the 100.5 million full-time producers are actually outnumbered by the approximately 111 million people who have an income without a full-time job or even any job.

These good people run the gamut from seniors enjoying a well-earned retirement to unmotivated but well-fed affluent late starters on extended unemployment, the disabled, welfare recipients, part-time workers and a host of others.

But that still leaves the 100.5 million full-time workers, right? Not really because upward of 20 million of them work for the government; that means 80.5 million workers must produce nearly all the goods, services, food, medical care and housing for 311 million, plus pay the 20 million who work in government. They must also provide all the government subsidies, finance the military pay off the national debt and feed themselves if there’s anything left over.

Put bluntly, every private-sector, full-time worker supports or subsidizes about 3.8 people. Our government’s largely unopposed wealth redistribution policies mean that this number will soon be one in four. By then, there won’t be much wealth to share, or as residents of the old Soviet Union used to joke, “The only thing we share is the poverty.”

Op-ed