Since the early days of magazines such as The Other Side and Sojourners, Christian Left activists have stood on guard to identify the threatening forces of wealthy capitalists. Embracing a zero-sum model that said wealth creates poverty (the rich get richer, the poor get poorer), these activists appeared to favor every wealth distribution scheme that crossed their path. And arguments that the wealthy were not paying their “fair” share of taxes seemed reasonable. But how true is this? Does the so-called 1 percent really hold back the 99 percent?
Catholic author and intellectual Michael Novak tackled this issue back in the 1980s, presenting his analysis in the Christian Century. With their “prejudice against the wealthy” religious intellectuals demanded higher taxation of the rich. But they, like critics of capitalism today, overestimated the number and income of rich people. They also ignored that the rich paid a significant proportion of all taxes.
Novak first looked at the number of millionaires in 1982 and found that “the total adjusted gross income of those who earned $1 million or more came to $17.6 billion. About half of this sum was taxed away – enough to keep the federal government going for about three working days. If the entire sum had been confiscated, $17.6 billion would pay the government’s current bills for about six working days.” Similarly, today’s so-called [Warren] Buffet Rule of increasing taxes on the rich would not make much of a difference revenue wise.
Novak then examined what percentage of total taxes the rich did actually pay. The top 10 percent of income earners paid 49 percent of all taxes. In contrast, the bottom half of all income earners paid 7.2 percent. Recent data from the Congressional Budget Office reveals a similar story. In 2007, the top 10 percent paid 55 percent of all federal tax revenues; the bottom 40 percent paid 5.2 percent (the bottom 20 percent paid 0.8 percent, the top 20 percent paid 68.9 percent).
Given these figures, there is one major problem with the economic thinking of liberals. No matter how much the rich are taxed there will never be enough money to meet the objectives of President Obama. Total confiscation would only bring a modest amount to the table.
Moreover, there would be other consequences of such taxation. Higher taxation would mean economic decline because of the disincentives for economic activism. In 1983, a former chief economist of U.S. Steel wrote:
[I]t is the entrepreneur – no matter how denigrated – who continuously seeks out business opportunities and accordingly combines, land, labor and capital into fresh and hopefully profit-making, wealth-creating and job-inducing situations in an ever risky, uncertain and dynamic world.
Of course, there should be punishment for those guilty of corruption and any other illegality in the business world. And the Bible clearly warns us not to worship Mammon. But let us think carefully about raising false and destructive notions of resentment toward those wealthy citizens who do much in generating wealth and jobs for the benefit of all. On this issue, demagoguery might be politically wise (in the short term), but it is not economically wise.
See Michael Novak, “Preferential Option Against the Rich,” The Christian Century, August 29-September 5, 1984. William H. Peterson, “Kick a Businessman Today,” The Freeman, December 1983. Robert J. Samuelson, “’Buffet Tax’ and Truth in Numbers,” Washington Post, January 29, 2012.
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