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Jewish World Review March 31, 2000 /24 Adar II, 5760

Tony Snow

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The upside of progressive taxation

http://www.jewishworldreview.com -- THE BAD NEWS is that our system of progressive taxation has placed us on the verge of protracted class warfare. The good news is that the development dooms campaign finance reform.

Let me explain. Congress has succeeded in dividing American into classes of "pay" and "pay-nots." The most recent available data (1997) show that the top half of wage-earners shell out 95.7 percent of all federal income taxes and the rest pay approximately zilch. Those in the bottom 40 percent actually get back more than they pay.

Burdens increase as incomes do: Those in the top 1 percent shell out 27 percent of all federal income taxes; those in the top 10 percent pay 63 percent ; the top fifth pay 77 percent of the bills, and so on.

With each passing year, the obligations get nudged higher up the economic food chain. The majority of us are paying less to Uncle Sam than we have in previous years, which is why so few Americans give a rip about George W. Bush's plan to lower income-tax rates. The only people getting squeezed are the rich -- who have emerged as Public Enemy No. 1 in typical congressional discussions of the issue.

This issue came into play in the Republican presidential primaries, when John McCain complained that the top 10 percent of earners would get 60 percent of the benefits under George Bush's plan. If you consider that this same group pays 63 percent of the taxes, you realize that their relative share of the tax pie actually increases under the Bush proposal.

The fact is, the so-called rich are the only people eligible for tax relief because they're the only ones paying. The only way to lighten the load on those living south of the median income line is to start buying cars for them.

Unfortunately, envy has so encrusted our public discourse that we seldom think this way anymore. We have stopped exalting men and women of achievement (unless they play professional sports); we tar and feather them.

Populists have an ugly way of ignoring the accomplishments of the few in order to incite the avarice of the many. Yet the much-hated "rich" have fired up the economic explosion that has everybody buzzing -- and has filled government coffers from coast to coast.

So listen closely when the president and others crow. They point out that many people haven't had it this good since the 1960s, which is true. Unfortunately, they ignore a related point, which is that the Kennedy prosperity died when Congress got tax-happy and the productive classes decided to pack it in. The bubble burst in 1968, and the stock market didn't get seriously back on track for another 15 years.

We're flirting with a repeat. Economists Gary and Aldona Robbins argue that the trend in creeping rates among the top income classes parallels the pattern that began to appear in the mid-'60s. Although the signs look good now, everything could change if Alan Greenspan's crystal ball were to fog up for a few months.

The tidal shift in taxpaying responsibilities, coupled with jitters about economy, virtually ensures that campaign finance reform will die, and soon. People of means realize the "reform" wave so popular among politicians and pressies is merely a way to strengthen envy as a political force, and grant unprecedented power and influence to the press at the expense of just about everybody else.

This leads to a final and little-appreciated point. A nation divided into taxpayers and tax consumers is an insane idea. Government requires more than our money. It requires a sense of national unity. You don't get that when you sever the country into patrons and supplicants.

At some point, the taxpaying classes will demand a greater say in the use of tax dollars, arguing that freeloaders shouldn't have any say in the budget debate. Critics in turn will accuse the moguls of ruining democracy.

It is always easy to promote virtue using another person's money: Ask any member of Congress. But it's also a sure way to promote profligacy and hard feelings. Prosperous people who don't pay for government aren't likely to heed what it does. And when legislators function in obscurity, they become mischievous and frisky.

As a consequence, the tax issue isn't dead. It's just lurking.

Beware: The New Economy has succeeded in wiping away many vestiges of the old order, but it can't eradicate human nature. Sooner or later, the forces of envy will slam into the forces of self-interest, with thermonuclear political effects.

Just hope envy loses.

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© 2000, Creators Syndicate