Lincoln * Institute

Ralph R. Reiland

Ralph R. Reiland

The B. Kenneth Simon Professor of Free Enterprise at Robert Morris University

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Reflections

Socializing Incomes by Demonizing Success

by Ralph R. Reiland
 

Therewas nothing new in President Obama's admonishment that "if you've got

abusiness, you didn't build that --somebody else made that happen."

Tenmonths before Mr. Obama's statement, Harvard law professor Elizabeth Warren,

aself-described but unproven Cherokee (the New England Genealogy Association said it found hints, but no firm evidence, that Warren's great-great-greatgrandmother might have been a Cherokee, which, if true, would make Warren 31/32non-Indian), delivered a similar proclamation.

"There is nobody in this country who got rich on his own — nobody," declared Warren,currently running to unseat Republican Senator Scott Brown in

Massachusetts."Youbuilt a factory out there — good for you! But I want to be clear.

You movedyour goods to market on the roads the rest of us paid for. You hired

workers the rest of us paid to educate. You were safe in your factory because of

policeforces and fire forces that the rest of us paid for. You didn't have to

worrythat marauding bands would come and seize everything at your factory, and

hiresomeone to protect against this, because of the work the rest of us did."

To see the full intent and passion of Warren's words, it's best to watch

theaforementioned rebuke on video, seeing the hands incessantly waving,

fingerspointing and the lecturing voice rising in righteous indignation.

Continued Warren, "Now look, you built a factory and itturned into something

terrific, or a great idea — God bless, keep a big hunk ofit, but part of the

underlying social contract is you take a hunk of that andpay forward for the next kid who comes along."

That sounds like the factory owner reneged on his responsibility to pay for

theroads, schools, cops and fire department. He's charged with getting a free ride, moving his "goods to market on the roads the rest of us paid for." Thesame with the police, teachers, and firefighters, all made to sound likefreebies for America's factory owners and entrepreneurs.

President Obama repeatedly makes the same insinuationwhen he charges that America's "millionaires and billionaires" aren't payingtheir "fair share."

What Warren and Obama fail to mention when pushing for higher federal taxes at the top and more "fairness" in the distribution of wealth and income is theprogressivity that already exists in the federal tax system, the fact that theeffective tax rate rises as income grows.

Dr. Jeffrey H. Anderson, citing analyses from The TaxPolicy Center, a center-left policy organization formed by the BrookingsInstitution and Urban Institute, reported that the lowest quintile (20 percent)and second lowest quintile of income earners in 2010 paid a minus 3.8 percentand minus 4.3 percent, respectively, of the nation's total federal income taxbill, getting back in tax credits, etc., more than they paid in.

The middle income quintile in 2010 paid 3.9 percent oftotal federal income taxes

while the second-highest income quintile paid 15.1percent of all federal income

taxes.

In other words, the aforementioned 80 percent of allincome earners in 2010

collectively paid 10.9 percent of total federal incometaxes, while the top 20

percent paid the remaining 89.1 percent.

The factory owner, in short, is far from getting a free ride on roads "the restof us paid for." He doesn't need a condescending lecture about why thecollective is entitled to a "hunk" of his income. He already pays, and paysdisproportionately.

The political game here is to demonize "the rich" asundeserving, as grasping

vultures who are unfairly receiving (not earning) toobig a piece of the pie. The

solution then becomes higher taxes at the top onthese allegedly ill-gotten incomes, money that can be confiscated andredistributed in order to buy votes.

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Ralph R. Reiland is an associate professor of economics and the B. KennethSimon

professor of free enterprise at Robert Morris University in Pittsburgh.

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Ralph R. Reiland

Pittsburgh, Pa. 15236

Phone: 412-527-2199 / E-mail: rrreiland@aol.com