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To: Skeeter Bug who wrote (158130)	6/26/2003 5:25:28 PM
From: GST	Read Replies (2) \| Respond to of 164684

<obfuscation is much more pallatable than the truth> I have never been so disgusted with fraudulent political spin coming out of Washington in my whole life.

To: Skeeter Bug who wrote (158130)	7/8/2003 12:05:43 PM
From: Oeconomicus	Read Replies (2) \| Respond to of 164684

Those Notorious IRS 400 A recent Internal Revenue Service study on wealth and taxes has become one more opportunity for political mischief, in particular another verse in the media's class-warfare refrain. We agree the data are revealing, but because of what they show about the pitfalls of an increasingly progressive tax code rather than anything about income inequality. The IRS analyzed the 400 tax returns with the highest adjusted gross income for the years 1992-2000. This group reported income of nearly $69.6 billion in 2000, up from $18.7 billion nine years earlier. So yes, the rich did get richer during the Clinton years. But so did a lot of other people. The IRS also reports that the number of tax returns showing at least $200,000 in income more than doubled during the 1990s to a record 2.8 million. The most revealing part of the study, however, has to do with who makes up the top 400. They're not the same people every year, though you'd have to read deep into most of the news stories to find this out. According to the IRS press release, "Over the nine tax years . . . a total of 3,600 returns were identified for the table. Of the taxpayers who appear in this group of 3,600 returns, less than 25 percent appear more than once, and less than 13 percent appear more than twice." In plainer English, the 400 richest Americans keep changing from year to year, as the nearby chart shows. No fewer than 2,218 separate filers joined the elite group at least once. The Rich Are Different Frequency of Appearing in the Top 400 Tax Returns Between 1992 and 2000 Number of Returns in All Nine Years 3,600 Number of Filers Appearing in: Any year 2,218 One year 1,679 Two years 252 Three years 94 Four years 52 Five years 42 Six years 36 Seven years 24 Eight years 18 All nine years 21 Source: Joint Economic Committee This turnover reflects the fact that most of these high earners are reporting income from the sale of capital assets, rather than from wages and salaries. In many cases they are cashing in on a lifetime of wealth accumulated from risk-taking on a business or from saving and investment. But for the IRS -- and for journalists who don't know the difference between wealth and income -- these people become "rich," even if it's just for one year. Data on income inequality are based on shares of the aggregate, and so the implicit assumption is that the size of the pie is fixed. But in the 1990s, the income pie got bigger and so did some of the pieces. Census figures showing average real income by quintiles reveal that those who are currently moving through the bottom rung have more income per capita than ever before. They're better off, even though their share of the pie is smaller. One irony is that the 1997 capital gains tax cut may actually have boosted federal revenue by inducing more of the rich to sell their long-held assets. And it's difficult to accuse this group of not paying its fair share. In 1992 the top 400's earnings represented 0.52% of the country's reported income, yet they carried 1.04% of the tax burden. By 2000, they earned 1.1% of the income but paid 1.6% of the taxes. It's also worth noting that the 1990s' trend is one we've seen through both Republican and Democratic administrations. The share of income going to the wealthy rises whether we raise or lower taxes, which indicates that forces in the economy far beyond the reach of tax policy are at work. Those who are keen to use this income distribution data to knock the Bush tax cuts should remember that the IRS figures are pretax. Which means you can double the tax rates and still not have much effect on income distribution (except insofar as it changes the incentive to earn and report income). The official measures exclude both the taxes the rich pay and benefits the poor receive, like housing and food stamps. In other words, tax cuts aren't part of the "income inequality" equation. The real problem for liberals and their media acolytes is that they've created a progressive tax system that is more and more dependent on all of these rich folks. Just ask California Governor Gray Davis, who's facing a $38 billion budget deficit after watching his revenue windfall from capital gains and stock options disappear with the bursting bubble that collapsed the incomes of all those high-earners in Silicon Valley and Hollywood. That state's steeply progressive tax code was a political sucker game during the boom, fooling the politicians into thinking they could spend more than they should have. Now the state is paying for this "progressive" self-delusion. But this heavy liberal dependence on the upper brackets is true at the federal level, too, where the top 1% of earners paid 37% of income taxes in 2000, while the top-earning 25% -- those making $55,000 and above -- paid a whopping 84%. Judging from this, you'd think liberals would love income inequality. Their government financing system depends on it. online.wsj.com