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GOP Pleads Save the Rich as Income Gap Hits Record

April 19, 2009

Among the more comic moments of last week's right-wing tea-bagging extravaganza was the plea from former Bush press secretary Ari Fleischer to save the rich. But even as Fleischer wrongly fretted that "their burden keeps getting heavier," new data from the Congressional Budget Office (CBO) revealed the income gap between rich and poor tripled between 1979 and 2006. As it turns out, income concentration is greater than at any time since 1929.
That inescapable conclusion is just one headline from an analysis of the CBO data by the Center on Budget and Policy Priorities (CBPP). Even as median family income declined by 1% between 2000 and 2007, the share accumulated by the wealthiest Americans reached record levels during the halcyon days of the Bush era:

Top incomes continued climbing in the 1990s, to 20.6 times higher than the middle fifth of households in 2000 and 21.3 times higher in 2005. By 2006, top incomes were 23.0 times higher than those of the middle fifth -- nearly tripling the income gap between the top 1 percent and those in the middle since 1979.
The gap between the top 1 percent and the poorest fifth of Americans widened even more dramatically over this same period. In 1979, the incomes of the top 1 percent were 22.6 times higher than those of the bottom fifth. Top incomes continued climbing to 63.1 times higher in 2000 and 72.7 times higher by 2006 -- more than tripling the rich-poor gap in 27 years.

The disparities are mind-numbing. While the bottom fifth of earners saw their incomes rise 11% to $16,500 between 1979 and 2006, the top quintile and top 1% enjoyed whopping gains of 87% and 256%, respectively. (The middle fifth earned just 21% at the end of the same 27 year span.)
Further, the CBPP study suggested, the $1.7 trillion Bush tax cuts accelerated the growing chasm. As I detailed last week in "10 Republican Lies for Tax Day," it is a tall tale indeed to claim the rich are already paying too much in taxes.
As the Center for American Progress noted, the Bush tax cuts delivered a third of their total benefits to the wealthiest 1% of Americans. And to be sure, their payday was staggering. As the Center on Budget and Policy Priorities detailed, by 2007 millionaires on average pocketed $120,000 from the Bush tax cuts of 2001 and 2003. Those in the top 1% stashed an extra $45,000 a year. As a result, millionaires saw their after-tax incomes rise by 7.6%, while the gains for the middle quintile and bottom 20% of Americans were a paltry 2.3% and 0.4%, respectively. (Another CBPP study demonstrated that the Bush tax cuts accounted for half of the mushrooming deficits during his tenure in the White House.)
And as the New York Times uncovered in 2006, the 2003 Bush dividend and capital gains tax cuts offered almost nothing to taxpayers earning below $100,000 a year. Instead, those windfalls reduced taxes "on incomes of more than $10 million by an average of about $500,000." As the Times revealed in a jaw-dropping chart, "the top 2 percent of taxpayers, those making more than $200,000, received more than 70% of the increased tax savings from those cuts in investment income." So it should come as no surprise that the income share of the 400 richest Americans doubled over the past decade.
And it is precisely that windfall, and not any increase in tax rates, which produced the growing upper-income tax bills so bemoaned by the likes of Ari Fleischer and supply-side snake oil salesman Arthur Laffer. A footnote in the CBPP report detailed the true dynamic at work:

CBO's data show that the share of total federal taxes paid by the top 1 percent of households rose from 27.7 percent in 2005 to 28.3 percent in 2006, the highest share on record in the CBO data. The rising share of taxes paid by the wealthy is often cited erroneously as evidence that the tax burden on the highest-income households is rising. In fact, the increase in the share of taxes paid by the top 1 percent of households from 2005 to 2006 occurred despite a slight decline in the effective federal tax rate (i.e., in the percentage of income paid in federal taxes) the top 1 percent of households faces - from 31.6 percent of income in 2005 to 31.2 percent of income in 2006.
The increase in the share of taxes paid by those at the top did not occur because this group's taxes were raised - they were not - but because the share of pretax income going to the top 1 percent of households rose from 18.1 percent of total income in the country in 2005 to 18.8 percent in 2006. Indeed, the effective tax rate of the top 1 percent of households was lower in 2006 than in any year since 1992.

Still, the utter falsehood of a statement is no impediment to a Republican uttering it. So leave it to Bush's former flunkie Fleischer to make his comic Tax Week plea on behalf of the nation's bedraggled wealthy. The top 10% of taxpayers, Fleischer insisted in the Wall Street Journal, are "supporting virtually everyone and everything" and "their burden keeps getting heavier." As he put it:

"It's also what's called redistribution of income, and it is getting out of hand."

Oh, it's gotten out of hand all right, just not in the direction Fleischer claims.
That said, Americans can expect a temporary halt to the wealthiest among them grabbing an ever larger share of the pie. Not because President Obama has proposed a modest increase in upper income tax rates by returning them to their Clinton-era levels. Instead, just as in the wake of the bursting of the dotcom bubble, the current implosion on Wall Street will briefly erase some of the richest Americans' wealth on paper.
But as the economy begins it recovery, so too will the stratospheric growth in income inequality.

4 comments on “GOP Pleads Save the Rich as Income Gap Hits Record”

  1. That chart tells you everything you need to know about who's actually fighting and winning the class war.

  2. It is not surprising to read about how the wealthy in our country have a mouth piece from the former administration. Is Eri Fleischer on some hinden payroll of the the wealthy, or is he just trying to maintain face time in the media, and continue the past administrations unreasonable attempts at convincing us hard working Americans that the wealthy have it rougher than those of us who are not as wealthy as they are, when it comes to being taxed. I pay my bills each and every month at least by their respective due dates, and I have yet to be handed anything by the wealthy in our country. The bottom line here folks, is that if you are making more money, then you should pay more in taxes, and not be allowed to shelter anymore of your income than the rest of us tax payers are allowed to. If this affends you wealthy types, and their mouth piece Eri Fleischer, so much the better! Our nations system of taxation is far from being fair, and needs an overhaul. You can bet those wealthy types will be pulling out all the stops, and maintain contact with with any and all elected officials they know, in order to get what they feel is just for themselves and their wealthy counterparts, when and if this overhaul does in fact take place. The wealthy will provide all sorts of moneies to all the people and places which they feel will accomplish their end goal, which is to remain wealthy, and pay as little in taxes as they have to. There are many loop holes in our taxation system, and the common hard working people in our country take advantage of the tax breaks which they are entitled to, in accordance with the prescribed tax schedules. When it comes to those wealthy types, they want to take advantage of what they are entitled to, while pushing the edge of the taxation envelope past what any reasonable person would do, and take advantage of what they are not entitled to. Why are they allowed to do this in the first place, it is all about who you know, and how to manipulate our taxation system. You wealthy types may not like what I have said here, and this may affend the lot of you, this is not important to me. The rich keep getting richer on the backs of the common hard working people of our nation. It is these common hard working people that carry the bulk of the financial burden of our country, not the wealthy. So Mr. Fleischer, please do not get up in front of anyone and preach about how bad the wealthy types in our country have it, that boat doen't float.

  3. I just discovered your site. Your coverage of events and commentary are outstanding. Finally, the idea that we are even debating tax increases while running multi-trillion dollar deficits shows just how far gone this country is.

  4. this Glendon thing. you have it figured out.
    plus, the post you did on the so-called "war on Catholics" really being a war within Catholic ranks?
    you got that figured out, too.
    so, two for two!


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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