What progressives get wrong about income distribution

Freedom Unaffiliated

What progressives get wrong about income distribution

By Mike Rosen

In my last column, I debunked the claim that the rich don’t pay their fair share of the taxes. A reader’s online comment grudgingly conceded my point but sidestepped it with a counter argument about unfair income distribution. Had I more space I’d have dealt with that then, so let’s do it here.

The commenter said: “These numbers were telling but how? The top 1% have 2 ½ times the share of income of the bottom 50%. The top half have more than 8 times the share of the bottom half. No wonder half the country wants the federal government to facilitate wealth transfer and better opportunities. Of course, poor schools and big government will not fix this problem, but the income statistics are more troubling than the taxpaying numbers.”

While accurately stating my statistics he was apparently unaware of how income distribution data has been misrepresented by others. When Democrats, Leftists, and media liberals intentionally exaggerate income distribution, they torture the data with misrepresentations of effective income from the top to the bottom. In the report I cited, the IRS uses “adjusted gross income” (AGI), or income before taxes, which is significantly higher than the after-tax income of those in the upper categories. This widens the stated income gap.

Those in the bottom 50% pay very little or nothing in income taxes. (Many who qualify for the Earned Income Tax Credit have no tax bill, but actually get money from the IRS. Strangely, this is called a “refundable tax credit,” even though they had no tax bill to credit.) Most importantly, the AGI of lower-income filers does not include the greatest source of their direct and indirect income. That’s the trillions of dollars of aggregate federal, state and local government spending that flows to them through the cornucopia of “means-tested entitlements” (what used to be called “welfare”). It’s as if none of these programs existed to supplement their income and improve their lives.

One of the biggest programs is Supplemental Security Income (SSI), at almost $70 billion this year, for poor, older adults or people with disabilities who haven’t worked enough to qualify for Social Security. The long list of others includes housing and other subsidies, the Supplemental Nutritional Assistance Program, or SNAP (formerly called food stamps), student financial assistance, child nutrition and special milk programs, Medicaid and grants to states for Medicaid, children’s health insurance programs, payments to states for child support enforcement and family support, Temporary Assistance for Needy Families (TANF), low income home energy assistance, payments to states for day care assistance, substance abuse and mental health services, refugee assistance, and many more.

Another misleading nuance in income distribution data is the income life cycle. Young people, including those who live at home with well-to-do parents, file tax returns reporting very low AGI from summer jobs or part-time jobs after school. Also, there are millions of older retirees living in mortgage-free luxury homes with lots of savings and a comfortable lifestyle whose tax returns now misleadingly place them in middle or lower AGI categories.

As for income “disparity” as an offense to social justice ideology, this is the obsession of socialists and Marxists who oppose capitalism, private enterprise, meritocracy, and individual liberty; the very ingredients of America’s historical national wealth and standard of living. Their socialist model is a proven formula for worldwide totalitarianism and poverty. “Parity” means sameness or uniformity. Disparity in incomes is proper and justified if it means that ambitious people who work smarter, harder and responsibly deserve greater economic rewards than slackers and those who demand a “national minimum income” even for no work at all.

Extraordinary inventiveness also merits premium economic rewards. As does exceptional talent. One socialist cliché is that pro athletes are paid much more than teachers whom they believe do a far more important job. Duh, that’s because there are many millions of Americans who have the ability to be a teacher but only a handful with the talent to be an elite quarterback in the NFL. This is economic justice driven by the law of supply and demand. Our government spends most of its budget on social programs with commendable intent but—as measured by its perpetual deficits and soaring national debt—more than we can afford. “Soaking” the rich and successful is a path to economic ruin.