Debating Your Conservative Relatives at the July 4 Picnic—6 Popular Inequality Myths Debunked
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3) If You Tax Wealthy People Too Much, They’ll Stop Working
Example: Bill O’Reilly
If you tax achievement, some of the achievers are going to pack it in. Again, let's take me. My corporations employ scores of people. They depend on me to do what I do so they can make a nice salary. If Barack Obama begins taxing me more than 50 percent, which is very possible, I don't know how much longer I'm going to do this. I like my job, but there comes a point when taxation becomes oppressive. Is the country really entitled to half a person's income?
How to Respond
We could start with the fact that in the early 1950s the top tax bracket paid 91 percent of their marginal income in taxes. In the 1970s, they paid around 70 percent, and today they pay 35 percent. Now, the top bracket pays so little in taxes that many pay less than middle-class taxpayers. A study by Thomas Piketty, Emmanuel Saez and Stefanie Stantcheva finds that, “The top tax rate could be as high as 83 percent — as opposed to 57 percent in the pure supply-side model — without harming economic growth.” The authors argue that even using the assumptions of conservatives, we could have a 57 percent top tax rate (13 percent higher than currently) without decreasing economic activity. Further, they find that better assumptions would allow for more than doubling our tax rates without any negative impact on growth. Tax breaks for the rich don’t make rich people work more and create jobs; rather, the opposite is true. Tax breaks for poor and middle-class people stimulate demand, thereby creating more jobs.
4) Inequality Is Inevitable Consequence of the Information Economy
Example: Phil Gramm
The vast expansion of labor engaged in world commerce has raised the return on capital and reduced the relative return on labor. The share of income flowing to capital—both traditional and human capital such as education and training—has risen. In relative terms, the return to unskilled labor has fallen. Short of a crippling reversal in world trade, which would reduce the value of both labor and capital, this effect will dominate world markets for the foreseeable future. Since high-income Americans own more capital and have higher levels of education and training, their incomes have grown faster than everyone else's.
How to Respond
And yet, inequality has not increased in most other developed countries. In fact, income inequality is correlated very highly with lower unionization rates. The OECD finds that the U.S. not only begins with a less equal distribution of wealth, it also redistributes less income downward. Inequality increased dramatically in the United States because of tax cuts, union busting and unequal education outcomes that leave the poor and middle-class worse off. Policies in other countries like maternal leave, free college, universal healthcare, high minimum wages and guaranteed vacations could all lower inequality in the United States. Inequality is not inevitable, but the result of a political system bought and paid for by wealthy corporations.
5) America Is the Land of Opportunities, Poor People Just Won’t Take Them
Example: Thomas Sowell
Most people start out at the bottom, in entry-level jobs, and their incomes rise over time as they acquire more skills and experience. Ironically, those who make the most noise about income disparities or poverty contribute greatly to policies that promote both. The welfare state enables millions of people to meet their needs with little or no income-earning work on their part.