Alan Reynolds

A year-end AP-AOL News Poll found 89 percent of Americans optimistic about their own family's living standards, but less so about the fate of strangers. That is perfectly understandable. It is hard to read a newspaper without being told that only the top 1 percent are doing well, while the rest of us have either seen our jobs exported to China or have suffered years of unexplained "wage stagnation." Putting together all the downbeat news with the upbeat poll, what it shows is that 89 percent of Americans must think they're in the top 1 percent.

The purpose of the media's obsession with high incomes is to soften us up for a rerun of the "millionaire's surtax" of 1992, which soon proved to be rhetorical camouflage for tax hikes on pensioners, drivers and two-earner suburban families. Yet the top tax rate is already too high, and believe it or not, the lowest tax rate is also too low.

A couple of weeks ago, The Wall Street Journal's Hot Topic was "Can Bush's Tax Cuts Survive?" The article noted that "Democrats have said they would keep ... increased child credits ($204 billion over 10 years), some marriage penalty relief ($62 billion) and the new 10 percent income-tax bracket ($433 billion)."

Yet that is precisely where the lion's share of projected revenue loss is expected to occur. House Speaker Nancy Pelosi has been threatening to rehash a 39.6 percent tax rate for earnings above $500,000. But that would at best bring in barely one-tenth as much loot as getting rid of the 10 percent tax and the other two sacred cows.

The CBO's long-term budget projections, due soon, are likely to show that federal revenues will total nearly $35 trillion over the next 10 years. When you hear about Pelosi's grandiose impulse to squeeze another $70 billion or so out of her affluent neighbors over 10 years, that's about two-tenths of one percent of the revenue Congress will be collecting and wasting in any case.

This has nothing to do with the budget. It's about rich politicians posing as populists. Anyone serious about raising significant revenue without "killing the goose" would scrap that 10 percent rate.

Making a common yet serious mistake, the Wall Street Journal piece said, "Low-income earners must pay 10 percent of their income in taxes, instead of the 15 percent previously required."

Alan Reynolds

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