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Tuesday, November 6, 2012

Stone: The Perils of Income Inequality

Huffington Post op-ed:  The Perils of Income Inequality, by Geoffrey R. Stone (Chicago):

The Sixteenth Amendment to the Constitution, which authorized the federal government to impose an income tax on individuals, will turn 100 years old on February 3. It is unlikely that many corks will pop in celebration. But they should, because the income tax plays a central role in ensuring American democracy. More to the point of contemporary politics, the Sixteenth Amendment was designed precisely to protect the 47% of Americans Mitt Romney has reviled. ...

The Sixteenth Amendment was therefore not only about raising revenue. In targeting excessively concentrated wealth, the income tax addressed broader concerns about gross income inequality, which Americans rightly considered a menace to democracy. ...

Unfortunately, over the past half-century a succession of Republican administrations, representing the same constituents as those who opposed the income tax a century ago, has lowered the marginal tax rate on the wealthiest Americans from 90% under President Eisenhower, to 70% under President Nixon, to 50% under President Reagan, to 35% under President George W. Bush. The consequent income inequality, so celebrated today by Mitt Romney, once again represents a clear and present danger to American democracy.

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Comments

Margret Thatcher had a response to the whole 'income inequality' argument. It would seem some wouldn't care if we were all poorer as long as our incomes were equal - as if wealth were a zero sum game. This is all done in the name of 'democracy'. There are things more important than democracy - justice and liberty are two things that come to mind. Abuse of the sixteenth amendment deprives all of us of our Constitutional heritage.

Posted by: Dan Irving | Nov 6, 2012 10:07:28 AM

"the Sixteenth Amendment was designed precisely to protect the 47% of Americans Mitt Romney has reviled. ..."

I disagree. I've read that the 16th Amendment was designed precisely to replace alcohol tax revenue, so that the planned Prohibition (the 19th Amendment) would not bankrupt the government. There was also a "soak the rich" motivation. Transfer of income to 47% (or any other fraction) of the population was NOT the intent.

Posted by: AMTbuff | Nov 6, 2012 12:53:19 PM

It appears that Prof. Stone forget about the 28% bracket under President Reagan, which came about as part of a process of eliminating deductions and credits and broadening the tax base and which at least some credit with contributing to a 20-year boom in the real economy. President Clinton raised top marginal rates to 39%, which President Bush partially fixed with the reduction to today's 35% marginal rate.

Posted by: Douglas Levene | Nov 6, 2012 6:22:10 PM