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Message from he Presiden
“I am hardpressed tounderstandhow highertaxes willchange anyof the vastdemographicdifferencesbetween therich and poorin America.”
Wha Does I Meano Have a “Fair” TaxCode?
here has been a lot of media attention lately to theissue of inequality, with various reports purport-ing to show the rich getting richer while the rest of America is stuck in neutral. My colleague Will McBridecountered these claims with his own study showing thatinequality today is no worse than it was during the latter partof the Clinton Administration. Indeed, he found that inequality rose much faster during the Clinton years than the Bush years,a fact the media has been slow to report on.Of course, it is easy to demagogue the “rich” if youﬁrst deﬁne them as faceless “millionaires and billionaires.”However, when we look beyond the political rhetoric and “puta face” on America’s wealthy taxpayers, we ﬁnd that they areeverything we want Americans to be–married, educated, hard-working, older homeowners with business income.Demographic information is scarce on millionaires, butusing Census and IRS data, here is a basic proﬁle of householdswith incomes above $200,000:
83 percent are married-couple families.
56 percent are between the ages of 45 and 65.
73 percent of these families have two or more earners.
78 percent have a bachelor’s degree or higher.
61 percent of high-income households have children.
91 percent own their own home.
They earn 55 percent of all private business income (S corp, LLC, and soleproprietor).Meanwhile, low-income taxpayers tend to be the polar opposite of each of thesecharacteristics. They are: single; younger (although in some income bands there are anequal number of people over 65); they have high school degrees or less; and, they havepart-time jobs.While many in Washington, including President Obama, believe that raising taxes onthe rich will reduce income inequality in America, I am hard pressed to understand how higher taxes will change any of the vast demographic differences between the rich andpoor in America.Higher tax rates won’t make educated families less educated or older families any younger. Though, I suppose it’s possible that raising taxes on the rich could convincesome second-earners (typically professional women) to leave the workforce or discour-age others from becoming entrepreneurs. But why would we want to do that?As we all know, when you raise taxes on something you get less of it. Why do wewant fewer intact married families who are educated and have business income?Sincerely,
Scott A. Hodge