Paul L. Caron

Tuesday, October 19, 2021

WSJ Op-Ed: The Democrats’ Tax-The-Rich Ruse

Wall Street Journal op-ed:  The Democrats’ Tax-the-Rich Ruse, by Phil Gramm & Mike Solon:

President Biden’s effort to pass the largest tax increase in U.S. history is based on the verifiably false claim that Americans with high incomes don’t pay their “fair share.” In no other country do the rich bear a greater share of the income-tax burden than they do in the U.S.

Organization for Economic Cooperation and Development data show that the top 10% of American households earn about 33.5% of all earned income but pay 45.1% of all income taxes, including Social Security and Medicare payroll taxes. That progressivity ratio of 1.35 is far higher than in any other country. The ratio in France is 1.10. In Germany it’s 1.07, and in Sweden an even 1. In the last OECD study, in 2015, the top 10% of earners in the U.S. paid 45% of all income taxes. In France, the top 10% only paid 28%. In Germany they paid 31% and in Sweden 27%. Conversely, the bottom 90% of earners in the U.S. paid 55%. The bottom 90% of earners in France paid 72%. In Germany it was 69% and in Sweden 73%.


Since the War on Poverty started in 1965, the labor-force participation rate of bottom-quintile earners, who now receive more than 90% of their $50,000 average income from government transfer payments, has fallen from almost 70% to 36%. With the Build Back Better Act proposing to explode unearned benefits and shower them on middle-income Americans, how long will it take for the current U.S. labor-force participation rate of 61.6% to fall to 55%, as it is in France, or 50%, as it is in Italy? Who then will pull the wagon and pay the taxes to fund the American welfare state?

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