David Brooks vs. Progressives: Genteel Ignorance as Economic Warfare
Continued from previous page
Or as they say in cowboy bars everywhere: Let's go see a man about a horse.
Brooks claims that "today, especially after the recent tax increases, the total tax burden is already at historic highs." That's an astonishing assertion. The top Federal tax rate under Dwight D. Eisenhower was 91 percent. But Brooks claims that nobody ever paid that much, then boldly asserts that tax rate today are "at historic highs."
Unfortunately for conservative flim-flammers, real economists studied this question a few years back. Thomas Pikatty and Emanuel Saez found that when all taxes were combined the very wealthiest Americans (in the top 0.01 percent) paid a real tax rate of 55.3 percent in 1960 and only paid 34.7 percent in 2004 (the last year for which they had data). Since then the top tax rate has moved up slightly, but hardly "historically."
And yet Brooks blithely -- and falsely -- asserts that "If you combine federal, state, sales and other taxes, rich people in places like California and New York are seeing the government take 60 cents or more out of their last dollar earned." He adds that "the total tax burden was lower since so few people paid the top rate and there were so many ways to avoid it."
(That "last dollar" phrase is a nice touch. It expresses the way marginal tax rates work -- higher rates as your income goes up -- while adding the world-weary resonance of a hard-working entrepreneur earningt his "last dollar" before giving up the ghost. Does Brooks plan this sort of subliminal messaging, or is it a natural gift?)
Brooks' claim is completely untrue. So where did he get that idea? Probably from Fox News. Fox added up the official, or "statutory" rates for Federal and state taxes and came up with a total figure of 52 percent. But they forgot (or deliberately didn't mention) that state taxes are deductible from Federal taxes. You can't add the two figures up, as Fox (and Brooks) did), because you'll be overstating the tax burden significantly.
Fox also forgot (or deliberately didn't mention) that nobody pays the top tax rate for their "first dollar." (See what I did there? I used the phrase "first dollar," hoping you'd subliminally imagine a fresh-faced paperboy beginning a Horatio Alger-like climb to billionaire status. I'm working on my David Brooks chops.)
Since wealthiest among us pay a lower percentage of their income in taxes today, why does radio host Peter Schiff claim that "the share of income paid by the wealthiest Americans has essentially remained flat"? Simple: Because they're earning much more of the national income. And they're doing it at the expense of the middle class, which saw its real income stagnate for decades and then decline after the Great Recession.
Is the CPC budget's top tax rate of 49 percent too high? Won't rich people just stop doing all those wonderful job-creating things they do, just as Brooks says? They had a decade's worth of tax breaks. Do you remember all those jobs at the end of Bush II's presidency? Me neither.
In fact, another study concluded that the optimum tax rate for high earners -- the level above which they'll stop earning and producing -- is 73 percent, well above the CPC's top rate. (That paper was co-authored by a Nobel laureate, Peter Diamond.)
Conservatives like David Brooks are the economic version of climate-change deniers. They ignore mainstream economic thought, carefully compiled data, decades of real-world evidence, and the painful post-austerity experiences of the last several years in order to push a self-service political agenda.