I have rarely read such a comprehensive justification of trickle-down economics as that provided by Janet Schwandt (letter to the editor, Oct. 3). The theory was given the more palatable but less comprehensible name of “supply-side economics” and embraced as public policy during the Reagan years, and thrives to this day.
This theory claims that lower taxes encourage investment and increase general prosperity. According to Janet Schwandt, not only do the very wealthy benefit our economy, but they are endowed with every civic virtue. Without their philanthropy, we might not have hospitals, libraries, universities and other important public institutions. They also pay a fair and responsible share of income taxes.
I could provide a contrary view of the role of wealth in our society, but will deal here with the distribution of wealth and tax payments. The letter states that ”47 percent of us pay no income tax,” suggesting that the rest pay more than their fair share. This ignores the fact that everyone pays a great variety of taxes: payroll taxes, sales taxes, gas taxes, etc.
Federal income tax is less than one-half of the taxes paid to the federal government, and only about one-fifth of the taxes at all levels of government. These taxes fall most heavily on the lower and middle classes. A single worker, making the median wage of $26,000, pays about 25 percent of that in income and payroll taxes.
IRS figures show that the top 400 billionaires have an average income of $344 million per year. After allowing for $28 million in charitable deductions, their effective tax rate is less than 19 percent. Some individuals, such as hedge fund manager John Paulson, collect billions per year, but are able to use loopholes to avoid paying any income tax at all.
Janet Schwandt complains that the top 10 percent pay 70 percent of the income taxes. She fails to note that they also own 70 percent of the nation’s wealth. Taxation should be progressive, with the wealthier paying more, rather than everybody paying at the same rate. No, the wealthy do not pay their fair share.
Thanks to supply-side economics, there has been a dramatic redistribution of wealth in the last three decades. All the new wealth produced by American innovation and efficiency has gone to the top 10 percent. The bottom 90 percent has gained nothing.
What is most puzzling about this “class warfare” is that concerned citizens like Janet Schwandt defend the privileges of the wealthy and want to cut spending, probably on the safety net for the poor and elderly, rather than insisting that the very rich pay more, and that we stop spending on the wars that are costing us trillions.
Supply-side economics is a failed experiment. It has succeeded only in growing income disparity. It is clear why the wealthy support it. Why should it be tolerated by anyone else?
Robert E. Pearson