Income Inequality

So did you notice how fast all of Barack’s talk about income inequality flew by without a single solution offered?   All you have to do to understand this is do the math.  When we tax the rich heavily and don’t tax the poor whatsoever, it sets up an interesting situation.  Our tax revenue system comes to depend almost entirely on those few individuals at the top.  The only way to increase revenue is to make the rich richer and the poor poorer.  Hence it would be very counterproductive for the More-Tax Democrats to reduce income inequality.  So they just give it lip service.

            Let’s do some math.  The state of CA has learned what happens when you tax the bejabbers out of the rich but hardly tax anyone else.  In 2007 the state had 36 million residents but just 7000 households who made more than $5 million taxable income paid 20% of the state’s tax take--$11billion.  The following year came a recession and stock market crash and there were only 4700 $5M households.  The revenue from this group fell to $7 billion. This represented over half the revenue lost by the state that year.  Moreover, the entire net loss of revenue in the state was due to tax loss of the upper 10% of income earners.  The result of a highly progressive income tax is that the state becomes ever more reliant on the increasing prosperity of the richest of the rich. “Listen to me, Spielburg,Buffett and Gates! Pay your fair share! Pssst! We will quietly make you prosperous to do it. Please don’t move away!”

            The same thing happened to George W. Bush.  In the late 90’s the Republican Congress figured out that they could win lots of don’t-tax-me! votes by reducing taxes on the middle class and boosting taxes on the high income earners.  By the turn of the century, the federal government was running a surplus and jubilant speculation was that we could pay off the national debt in about 10 years.  Wrong.  The surplus was from the big revenue paid by the highest incomes during the dot-com boom of the stock market which ran out just as Bush was taking office and really hit the skids when the economy went into recession in 2001.  Ever after, Bush and the Republican Congress has been blamed for deficit spending.  But in fact, the revenue side of the ledger drastically went down during a decade when the stock market went sideways.  Again in 2007, recession hit just as the Pelosi revolution took over, started spending like a drunken sailor, and deficits have been staggeringly out of bounds.  From 2007 to 2013 national debt has gone from $7 trillion to 17 trillion.

            In prior years, a recession and market crash hasn’t hurt federal revenue so badly because common folks paid more taxes.  But when your tax policy depends on the rich, you’d better make them richer or suffer the consequences.  Fascists understood this inherently.  And thus, fascist governments take control over the biggest industries but promise a symbiosis with government.  Too big to fail. Too important to government and we'll make you a public utility of sorts. The banks, finance, transportation and health industries (and the elites) get in cahoots with the state and get on the gravy train.  Small businesses die on the vine.  National socialism is brought about by dominance of large state-controlled corporations. Obama seems to understand the principles of fascism, but can’t quite bring himself to do the hard work to make it happen.  Don’t worry, we have a dictator coming in our future that will be more efficient.

            The OECD studied the 24 most-developed countries and found that USA has the most progressive tax system.  While Scandinavians have higher taxes, they tax booze and coffee and have a fee for everything to raise about half their money.  Income taxes are less progressive than America’s.  But if Obama wants more federal revenue, he must increase, not decrease, income inequality.  The income inequality rhetoric is just a straw dog.  Meanwhile he plays golf with all the big shots.