To all but the Left it is now unmistakably near the worst of economic times. And because the bottom is falling out with higher unemployment, America is increasingly dependent on its top producers. Seen only as top earners, it has been easy to overlook their importance during prosperity, when they are often only a target for populist politics. The Left now seeks to lay the fault for the current financial crisis at their feet. Ironically, this crisis has proven their value, not their culpability.
The political influence of America’s mid to high earners has been diminishing for some time. This is no accident. They have always been a minority. According to the Joint Committee on Taxation, Congress’ official and nonpartisan revenue estimator, forecast just over 25% of income tax filers (itself a subset of the general population, which includes non-filers) would have incomes at $75,000 or more.
To those not conversant with tax distribution tables, that proportion is truly astounding. According to JCT’s 2008 projections, those making $75,000 and above — the combined income of two middle class earners — would pay 94.1% of all federal income taxes this year. Those making a $100,000 or more would pay 85.8%.
The common rejoinder to the income tax’s inverse payment pyramid is that the rest of the population shoulders the burden of social insurance (Social Security and Medicare) tax payment. Yet those making $75,000 and above also pay 65% of all these taxes as well.
For the Left, these earners’ enormous proportion of payment is still insufficient. Driven by an insatiable desire for more revenue and more income leveling, the Left continually presses to increase these earners’ slice of the payment pie.
And then came the current economic crisis. The economy has plunged and the stock market with it. Federal revenues have followed. According to the Congressional Budget Office, federal income tax revenues are down 15.3% and corporate receipts an incredible 56.6% from the same period last year — itself a recession year.
As a result, federal revenues are projected to fall to just 15.5% of GDP this year — their lowest level since 1950. And deficits have skyrocketed, reaching 11.9% of GDP — their highest level since WWII.
The only benefit of the current economic decline and its domino effect is that it gives a good vantage point to look again at the Left’s rob-the-rich rhetoric.
The current crisis vividly shows what happens when the top income earners’ incomes no longer top out. Or when revenues retrench from corporations’ falling profits. Or when investments leave the financial markets. The picture is one of dependency — dependency because these earners are in fact producers.
The Left overlooks the fact of value creation but it becomes all too clear when it is not created. Our earning class is a producing class. Without their resources, far more than they suffer — we all do.
Of course the demonization of America’s earning class has always been as inaccurate as it is misguided. The current economic crisis merely underscores this. Upper earners are rarely there permanently. Because of income mobility, individuals move up and down the earnings ladder as they age. Corporations are not the wealthy. They are shareholders from every income group — whether directly investing their own savings or through their pension plans.
Far from simply consuming profits from the economy, the economy is dependent on these producers not consuming but investing their earnings. Rather than growing wider, as the Left asserts during this downturn, the separation between Main Street and Wall Street has never been narrower and is growing more so every year.
The Left sees the current economic crisis as further indicting the earning class. Their solution is further expropriating their resources. Far from reducing, such action would only increase our already exaggerated dependence on them.
Like Atlas, the producing and earning class carries our economy on their shoulders. The world does not fully appreciate that fact until Atlas shrugs. And the Left not even then. The current crisis is an especially hard time for the Left. As their prejudices against the wealth producers grow more vocal, the fallacy of their arguments are more clearly visible.