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Home Publications Blogs Beat the Press The Power of the Rich Is Measured by their Income, Not Just Their Taxes

The Power of the Rich Is Measured by their Income, Not Just Their Taxes

Monday, 30 April 2012 02:07

Robert Samuelson somehow concludes that the rich don't have disproportionate influence on policy because the top quintile pays almost 70 percent of federal taxes. It is difficult to understand the logic of this one.

The rich don't just lobby for lower taxes, they also lobby for rules that redistribute before tax income upward. For example, patent monopolies on prescription drugs redistribute roughly $270 billion a year from the public as a whole to drug companies in the form of higher drug prices. Protectionist restrictions on foreign doctors practicing in the United States has pushed the average pay of doctors to around $250,000. This amounts to a transfer of close to $100 billion a year compared to a situation in which doctors were subject to the same sort of market competition as auto workers or dish washers.

The government also provides enormous subsidies to the super-rich in the form of too big to fail insurance for financial companies and one-sided labor laws that impose harsh restrictions on union-side violations but wrist slaps for employer side. There are many other ways in which the rich use lobbyists to ensure that income gets redistributed upward. It is understandable that they would like the public to only focus on taxes, but that is obviously a sidebar.

Comments (10)Add Comment
written by liberal, April 30, 2012 5:05
Of course, the "top quintile" is hardly "the rich".

As for "For example,...," the biggest upward transfer of income is government treatment of land rent, which is 10-20% of GDP. I completely agree with the examples Dean lists, but they're at least an order of magnitude smaller.
written by Leslie Plachta, April 30, 2012 6:53
I have to assume that the reason the average physician's salary is $250,000 is that specialists charge a lot for procedures. The average family practice doc's or pediatrician's salary is more like $150,000. It would be much better, in my eyes, to cap the pay for procedures and let no one earn exorbitant salaries. Opening up the US market to foreign docs would be a disaster for the countries from which these docs would come. Poor countries need their doctors as much, if not more, than we do!
Obvious fallacy here
written by Joe Emersberger, April 30, 2012 7:52
The percentage of income tax paid by the rich is a SYMTOM of inequality. It is an incredibly shoddy scam to try to pass it off as a sign that the rich are not powerful. For example, if 1 person had all the income then that person would pay 100% of the income tax. Would we conclude that the 1 super rich person was therefore overtaxed?

Conversely, as income becomes more evenly distrubuted, so does income tax.

1) Is isn't just doctors from poor countries who are not allowed free access to the US market.
2) Poor countries can implement polices that ensure doctors fully pay for the traiing they recieve before being allowed to cash in by moving to rich countries. One measure, already in place, is to require them to practice for a time in poor (often rural) areas before being fully licensed in their own country.

written by Chris, April 30, 2012 10:56
And of course taxes should be highly progressive for the simple reason that they pay for, as it were, wealth protection. Since the rich have vastly more wealth they should pay more in taxes to insure its safety and its protection.
1.medical procedures 2. why the american economy can't improve
written by mel in oregon, April 30, 2012 12:34
1.if someone needs an expensive procedure, such as an organ transplant, go to india or mexico & get it done there. it benefits the poor country, & you won't lose your home & go bankrupt. 2. you can research many sites like the fed reserve flow of funds, labor dept stats, & many other sites & you'll find that in spite of a lot of "happy talk" the basic fundamentals are still terrible. they are the heavy financial debt of most americans, such as at least 10 million homeowners are under water or very close, huge accelerating credit card debt, huge student loan debt, huge car loan debt. wages have stagnated for at least 3 or 4 decades. people work more & earn less, have fewer benefits, have their adult children moving home. romney's proposal to cut taxes on the wealthy has been tried & found wanting. obama's deeds never match his rhetoric. we won't be climbing out of the ongoing depression for decades if ever. the real truth is the american public is just too stupid & gets so easily distracted with nonsense issues like guns, wars & religion. no ones taking anyone's guns away, iran is no more a threat than iraq was, the idea God rewards the person who makes a fortune runs counter to what was said in the gospels. things aren't going to change, get used to it.
taxes and inequality
written by Barkley Rosser, April 30, 2012 4:27
According to latest numbers I see, the top quintile gets 53.4% of income and pays 67.2% of federal taxes. Aside from the fact that state and local taxes tend to be more regressive, yes, the federal tax code is mildly progressive. But the tax rate for the top quintile has been lower since 2001 than for any years since WW II except 1982 and 1983. Indeed, their high share of taxes paid reflects the higher share of income they get now, even as their tax rates have been low.

And as for benefits, an enormous amount of that increase for the poor is due to the rising cost of Medicaid, and RJS conveniently ignores the stagnation of TANF, whose numbers have barely budged during the Great Recession, even as SNAP numbers have risen, thank heavens.
written by liberal, April 30, 2012 7:43
chris wrote,
And of course taxes should be highly progressive for the simple reason that they pay for, as it were, wealth protection.


"The preservation of property is the end of government, and that for
which men enter into society. It is true governments cannot be
supported without great charge, and it is fit everyone who enjoys his
share of that protection should pay out of his estate his proportion
for the maintenance of it."
-- John Locke, Second Treatise on Government, 1690

"The revenues of the state are the fraction that each subject gives of
his property in order to secure or to have the agreeable enjoyment of
the remainder."
-- Baron de Montesquieu, The Spirit of Laws, 1751

"The expense of government to the individuals of a great nation is
like the expense of management to the joint tenants of a great estate,
who are all obliged to contribute in proportion to their respective
interests in the estate. In the observation or neglect of this maxim
consists what is called the equality or inequality of taxation."
-- Adam Smith, The wealth of Nations, 1776

"It is generally alowed by all, that men shuold contribute to the
public charge but according to the share and interest they have in the
public peace; that is, according to their estates or riches."
-- Sir William Petty, British Prime Minister, 1782-3

"Every man is bound to contribute to the public revenue in proportino
to the benefits he receives from the public protection."
-- Thomas M Cooley, Constitutional Limitation, 1868

Though a stronger reason for taxing the rich is that most of their wealth comes from economic rents, aka legalized theft.
written by J, April 30, 2012 9:56
Don't forget the myth of frivolous litigation that drives up the cost of health and car insurance that results in tort reform that stacks the deck against plaintiffs. Then there's the changes to rules of civil procedure to weed out cases with litigation expenses, understaffed investigative agencies, and tight fisted legal aid budgets that make it harder for people to get relief for being mistreated by deep pocket businesses and individuals. If something happens to you, then you're basically screwed without money to fight back. We have all these rules that can bankrupt people for even trying to stand up for themselves.
written by liberal, May 01, 2012 7:58
J wrote,
Don't forget the myth of frivolous litigation ...

The #1 reason I view the "frivolous litigation" viewpoint as BS is that they never complain about lawsuits launched by corporations.
written by J, May 01, 2012 9:19
liberal, you're right. Case in point, the patent trolling, suing parents because some kid downloaded a crappy MP3 song, and denying people legit insurance claims to see whether people will go to trial and then settle at the last minute.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.