On June 26, readers of The New York Times saw this headline at the top of page one: "Very Richest's Share of Income Grew Even Bigger, Data Show." One would have thought that important news was being broken. But in fact, the reporter, Pulitzer Prize winner David Cay Johnston, writes virtually the same article annually. On Feb. 7, 2002, and Feb, 26, 2001, he said almost exactly the same thing.
You see, the Internal Revenue Service is required by law to produce data on taxes paid by the richest Americans. So whenever this data is ready for release, some friendly bureaucrat at the IRS lets Johnston have an advance look. The IRS knows from experience that it will get big play in the Times, which always hypes every nugget of information showing the rich getting richer during Republican administrations. It is ignored or buried on the back pages during Democratic administrations.
This year, the IRS did something a little different. Normally, it reports data for those with incomes above $200,000. However, this time it singled out the richest 400 Americans for special scrutiny. It said that the new data was "in response to requests," but gave no indication of where these "requests" came from. I doubt that they came from Republicans. One wonders, also, why it chose the top 400 for analysis? Perhaps it is because Forbes Magazine has annually calculated the 400 richest Americans for some years.
Whatever the reason, it was grist for the liberal Times. It is doubtful that very many readers inspected the article carefully enough to realize that the data only went through 2000, when Bill Clinton was still president. The obvious implication of the headline was that the Bush tax cuts somehow created this result, also implied by the notes accompanying the charts on page one: "The average income of the top 400 taxpayers grew steadily ... while they paid less of their income in taxes."
The average tax rate on the top 400 peaked in 1995 and fell thereafter. According to the Times, the lower effective rates resulted primarily from lower taxes on capital gains and increased gifts to charities by the wealthy. But the capital gains tax didn't fall until 1997 and we want more charitable contributions. It is disingenuous to praise such gifts, as the Times often does, while condemning the fact that this necessarily lowers one's taxable income. Why one should be taxed on income one has given away to a church, hospital or university is left unanswered, although it is implied that this is wrong because it lowers one's tax liability.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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