CENTRAL VIEW for Monday, November 3, 2003

It’s the tax cuts, stupid!

Trying to pit one group of Americans against another group of Americans – the politics of class warfare or class envy – is the modus operandi of one political party. We’ll leave it to our gentle readers to figure out which.

But before we become too envious of the “filthy rich,” let’s see what they are contributing to Uncle Sam these days in income taxes.

Let’s say your family’s Adjusted Gross Income or AGI is $92,700 per year. That puts your family into the upper ten-percent of family incomes. Guess what? You are among the group that gets to pay 65-percent of what the federal government receives in income taxes.

Okay. Let’s move up a notch. If your family’s AGI is $127,900 or more, your income group actually paid 53-percent of the nation’s income taxes.

But wait. There’s more. If your family’s AGI is $292,000 or more, your income group is paying 34-percent of all federal income taxes.

To re-cap: Added altogether, the top ten-percent of income earners are paying 65-percent of the income tax burden.

Now, let’s turn the telescope around and look at the other end of the economic food chain. The remaining 35-percent of income taxes were paid by the bottom 90-percent of income earners. Moreover, the bottom 50-percent of income earners only paid four-percent of the total federal income tax. And, the very lowest earners actually had a negative tax rate. In other words, due to the earned income tax credit refunds, they paid no income taxes but were rewarded by sharing in the taxes paid by those with higher incomes. Anyway you cut it, that’s socialism.

Thus, the earned income tax credit refunds (how can you get a refund for something you never paid in the first place?) create an incentive to not work, or to earn very little. For sure, the system creates a disincentive against earning more than $92,700 per annum.

But, in fairness, even the poor are over-taxed with sales taxes, state income taxes, social security taxes, license fees – the list is almost endless.

Yet, as a class, the people who earn, save, invest and thus provide the capital to build factories and to create businesses that hire workers, may be entitled to claim they are in a class being victimized by those who don’t work or work very poorly but who get to enjoy the fruits of the labors of those who work their tails off.

Clearly, the economy is breaking out of the recession that began in the last six months of the Clinton Administration. Here are the latest figures: September new home starts broke all records. Employment grew by 57,000 in September. Over the last ten months, stock market values have increased over $2 trillion dollars. Disposable personal income is up by 3.8 percent. Gross Domestic Product (GDP) growth rose 3.3-percent in the second quarter. Home ownership has risen to 68-percent. Productivity rates, orders of manufacturing and orders for durable goods are increasing.

Yes, some jobs are disappearing. But those jobs are disappearing mostly due to higher productivity. Many of the evaporated jobs are menial work Americans don’t like to do, anyway.

The claim we are exporting good jobs to China and other low-wage countries is not accurate. In fact, George Mason University economics professor, Dr. Walter Williams, says China and other low-wage countries are losing, not gaining, jobs.

So, why is the American economy in the beginning of a robust economic recovery? You don’t suppose letting Americans of all tax brackets keep more of their money to save, invest and spend has something to do with it?

From President John F. Kennedy to President Ronald Reagan to President George W. Bush, letting more Americans keep more of their hard-earned money has led, and is leading, to many months of sustained economic growth. To paraphrase Bill Clinton’s campaign manager, James Carville, “It’s the tax cuts, stupid.”

William Hamilton, a nationally syndicated columnist and featured commentator for USA Today, is the co-author of The Grand Conspiracy and The Panama Conspiracy – novels about terrorist attacks on Colorado’s water supply and on the Panama Canal, respectively.

©2003. William Hamilton.

Dr. Hamilton can be contacted at:

Email: william@central-view.com