Politics & Policy

The Rich Get Poorer

Watching the rhetoric.

At lunch with an urbane former publisher, now distinguished professor, the new tax plan of Mr. Bush came up for discussion and I remarked that the class warriors would be in full cry. My resourceful friend said, Hey, where do you get off charging class-warfare when all some people want is simply to criticize a proposed tax bill?

Waal, I said, what you do is watch the rhetoric. See how they say it, what are their formulations. Are the critics simply saying: This proposed tax reform is a bad idea, or are they saying, “Here we go, mulcting the poor in order to make the rich richer” — that kind of thing.

I proffered as an example of the political mind-tilt, even of professionals who think themselves entirely neutral on such questions, that morning’s obituary in the New York Times on Roy Jenkins, the British scholar/politician. Toward the end of a full account of Lord Jenkins’s life the reporter wrote, “After four years in Brussels, Mr. Jenkins returned home in 1981 to find British politics polarized between an unelectable Labor Party controlled by the hard left and an ultra-right Conservative government dominated by Mrs. Thatcher.” The Left in Great Britain becomes, under the kindly editorial nurture of the New York Times, merely the “hard” Left. The Right — the “ultra-right.”

That same day the Wall Street Journal commented in an editorial about the end of the so-called “luxury tax,” which, beginning in 1991, was designed to impose surcharges on high-priced goods — a 10 percent surcharge on cars valued above $30,000, on boats valued above $100,000, and on jewelry and furs above $10,000. Upon passage of the bill, “Democrats like Ted Kennedy and then-Senate Majority Leader George Mitchell crowed publicly about how the rich would finally be paying their fair share.” What happened was supply-side three-star fare. Boat sales dropped 77 percent, the new tax brought in $97 million less than projected, and boat builders laid off 25,000 workers. Blushing with embarrassment, ultra-hard class warriors noticed they’d badly missed their mark. Mitchell and Kennedy, in whose states most boats are built, acquiesced discretely in rescinding the tax, which survived only for luxury cars — and that ended on midnight last New Year’s.

The New York Times, in extensive coverage in four different stories, made the rich-poor point again and again, quoting critics whose identities were not always given. Nancy Pelosi, Democratic minority leader, of course, spoke with Democratic leaders about benefiting “the wealthiest Americans almost exclusively.” The Democrats ran into themselves in another account. The reporter wrote, “To the degree that anyone cares about taxation of dividends, Democrats said, it is a thin slice of the very richest Americans who are already the Republican Party’s patrons rather than the average working families that determine the outcome of elections.” If that is so, then Mr. Bush could hardly be accused of a purely political venture. If only the very rich will be helped, and they already vote Republican, how can the Republicans gain by pleasing this tiny percentage at the expense of the great majority?

The idea of freeing corporations of a tax on distributed dividends is reasonably reviewed consulting several criteria. 1) Will the shelter of dividends animate the market? Answer: The market went up 2 percent the day the plan surfaced, and might go up by as much as 20 percent if the reductions are realized. 2) Will the plan induce an economic stimulus? Answer: Certainly not for a while, since more than a year would need to go by before the tax reduction became palpable in the hands of investors. But a higher market value would brighten the skies. And finally, 3) Will the plan effect justice? Mr. Bush defended it on the grounds that a “principle” was involved. That is certainly the case. In the current system, dividends are twice taxed. It is true that 35.3 percent of the tax benefits would inure to households with incomes of $250K or higher. But it is also true that 24 percent of the benefits would go to those with incomes between $25,000 and $75,000.

To say that the rich primarily would benefit is profoundly irrelevant. The rich attend the Metropolitan Opera disproportionately because they can afford it and because the opera’s appeal rewards education and cosmopolitan exposure. The Metropolitan Museum is disproportionately patronized by the rich, even though it is relatively free, for the same reasons.

The word “rich” is loaded. When it is used in political commentary it is almost always used invidiously. You can’t say “principled” without evoking “unprincipled,” democratic without invoking undemocratic, rich without invoking poor. A jacobinical turn of the lips becomes appropriate.


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