Attention: TDR Forum Junkies 
Thomas Sowell:
Congressman Patrick Kennedy, a Rhode Island Democrat, recently declared to fellow party members at a Washington night spot, "I don't need Bush's tax cut" and added that he had never worked a day in his life.
A number of other rich people have at various times likewise declared that they do not need what are called "tax cuts for the rich. " But, whatever political points such rhetoric may score, it confuses issues that are long overdue to be clarified.
One of the most basic confusions is between income and wealth. You can have high income and low wealth or vice versa. We have all heard of athletes and entertainers who have earned millions and yet ended up broke. There are also people of relatively modest incomes who have saved and invested enough over the years to leave surprisingly large amounts of wealth to their heirs.
Income tax cuts apply to income, not wealth. So the fact that some rich people say that they do not need a tax cut means nothing because they are not getting a tax cut on their wealth, since their wealth is not being taxed anyway.
Looked at differently, high tax rates hit people who are currently earning high incomes -- usually late in life, after having worked their way up in their professions over a period of decades. Genuinely rich people who have never had to work a day in their lives -- people like Congressman Kennedy -- are unaffected by income taxes, except on what they are currently earning, which may be a tiny fraction of what they own.
In other words, soak-the-rich tax rates do not in fact soak the rich. They soak people who are currently earning the rewards of having contributed to the economy. High income taxes punish people for becoming prosperous, not for having been born rich.
Even estate taxes can be minimized by hiring ingenious lawyers and accountants. But people who have had to work all their lives may not be nearly as able to afford such expensive ingenuity.
Someone who eventually works his way up to $100,000 a year will qualify as "rich" in liberal rhetoric but, by the time you reach that level, you may have a child in college and need to put some money aside for your retirement years. You are very unlikely to be able to afford a yacht.
Another fundamental confusion over tax cuts is confusing lower tax rates with reductions in tax revenues collected by the government. One of the enduring political myths of our generation has been the claim that the rise of federal deficits during the 1980s resulted from President Ronald Reagan's "tax cuts for the rich. "
Tax rates were cut. Tax revenues were not. More tax revenue was collected during every year of the two Reagan administrations than had ever been collected in any previous year in the history of the country. Nor was this experience unique.
When John F. Kennedy cut tax rates during the 1960s, tax revenues went up. The whole point was -- and is -- to encourage more economic activity, and more activity generates more tax revenues, even at lower rates. The same thing happened back in the 1920s.
Why then were there federal deficits during the Reagan administration? Because Congress spent even more money than the rising tax revenues brought in. There is no amount of money that Congress cannot outspend.
Although these were christened "the Reagan deficits," all spending bills originate in the House of Representatives -- and Ronald Reagan was never a member of the House of Representatives. Indeed, the Republicans never controlled the House of Representatives during either of the Reagan administrations.
Only after the Republicans gained control of the House in 1994 were there budget surpluses -- for which Bill Clinton took credit, even though he too had never been a member of Congress.
It is fascinating to see Congressional Democrats, who have for decades been spending the country into growing deficits, suddenly expressing shock at the current deficits that have occurred while George W. Bush was in the White House -- and the country was at war.
How serious are these deficits? As with all debts, the burden depends on what your income is. As a percentage of national income, today's deficits and national debt are far below what they were when Democrats were doing the spending.
Someone once pointed out that there are at least 50 colleges that claim to be among the top 25 colleges in the country. There is a similar congestion among the 400 "richest" Americans, as shown in data recently released by the Internal Revenue Service.
While much of the liberal media emphasized that these 400 highest income-earners had increased their share of national income between 1992 and 2000, only the Wall Street Journal pointed out that there are more than 2,000 people among these 400 "richest" Americans. How can you squeeze thousands of people into the top 400?
The key to this -- as to so much other nonsense that is trumpeted in the media about "the rich" and "the poor" -- is that we are not talking about the same people when we are making comparisons of different income brackets over a period of years. Most Americans do not stay in the same income bracket for even a decade, much less over a lifetime.
In the case of the Internal Revenue Service data on the 400 highest income-earners in the country, only 21 people were in that category throughout the nine years covered by IRS statistics. In other words, more than 2,000 people passed through this category in the course of nine years but fewer than two-dozen actually stayed there the whole time.
Other studies of income over time have shown very similar patterns of mobility -- not only in the United States but also in Britain, Holland, New Zealand, and other countries. But such facts are simply passed over in utter silence in the media and in much of academia.
Why? Because there is on the political left a huge vested interest in the concept of "class. " Class holds a sacred place in the new trinity of "race, class and gender" that has become a prevailing social dogma among the intelligentsia.
It is tough to admit that millions of people are constantly changing incomes and still talk as if we are all frozen into our classes or that we can be neatly divided into the rich and the poor, the haves and the have-nots.
Without that vision, what does the left have going for them? How can they justify seeking ever more power for the government, supposedly to redress our inequalities and injustices?
The outcries occasioned by the new IRS data are false in other ways as well. First of all, income is not wealth. People with much lower incomes than that earned by those passing swiftly through the top 400 can end up accumulating more wealth.
Indeed, some of the top 400 have high incomes in some years precisely because they cashed in some of the wealth that they had accumulated in previous years. They converted wealth to income and the media then verbally converted that income to wealth.
For most people, a home is their more valuable asset. Selling a house in California can make you instantly "rich" in statistical terms for that particular year. On the other hand, that matters only if you move to some place where you can buy another house much cheaper than in California.
My own income rose dramatically one year when I sold my house. But I bought another house with a bigger mortgage, so there was no real financial improvement. Still, briefly, I was part of the kind of statistics that so alarm liberals, though unfortunately not in the top 400.
As a result of inheritance taxes, many people who are left homes, farms or businesses have huge taxes to pay and not enough money to pay them -- unless they sell those homes, farms or businesses. That makes them "rich" -- for that year.
Moreover, any attempts to stop taxing assets that were already taxed when the original owner was alive are sure to be denounced as "tax cuts for the rich. " Ironically, all this demagoguery is about people who in most cases are not rich at all.
Even when you look at people who are genuinely rich, there is still turnover. When Forbes magazine published its first list of the 400 richest Americans in 1982, there were 14 Rockefellers, 23 du Ponts, and 11 Hunts. Twenty years later, there were 3 Rockefellers, one Hunt and no du Ponts.
But facts make no dent on those who are fixated on the sacred trinity of race, class and gender.
Congressman Patrick Kennedy, a Rhode Island Democrat, recently declared to fellow party members at a Washington night spot, "I don't need Bush's tax cut" and added that he had never worked a day in his life.
A number of other rich people have at various times likewise declared that they do not need what are called "tax cuts for the rich. " But, whatever political points such rhetoric may score, it confuses issues that are long overdue to be clarified.
One of the most basic confusions is between income and wealth. You can have high income and low wealth or vice versa. We have all heard of athletes and entertainers who have earned millions and yet ended up broke. There are also people of relatively modest incomes who have saved and invested enough over the years to leave surprisingly large amounts of wealth to their heirs.
Income tax cuts apply to income, not wealth. So the fact that some rich people say that they do not need a tax cut means nothing because they are not getting a tax cut on their wealth, since their wealth is not being taxed anyway.
Looked at differently, high tax rates hit people who are currently earning high incomes -- usually late in life, after having worked their way up in their professions over a period of decades. Genuinely rich people who have never had to work a day in their lives -- people like Congressman Kennedy -- are unaffected by income taxes, except on what they are currently earning, which may be a tiny fraction of what they own.
In other words, soak-the-rich tax rates do not in fact soak the rich. They soak people who are currently earning the rewards of having contributed to the economy. High income taxes punish people for becoming prosperous, not for having been born rich.
Even estate taxes can be minimized by hiring ingenious lawyers and accountants. But people who have had to work all their lives may not be nearly as able to afford such expensive ingenuity.
Someone who eventually works his way up to $100,000 a year will qualify as "rich" in liberal rhetoric but, by the time you reach that level, you may have a child in college and need to put some money aside for your retirement years. You are very unlikely to be able to afford a yacht.
Another fundamental confusion over tax cuts is confusing lower tax rates with reductions in tax revenues collected by the government. One of the enduring political myths of our generation has been the claim that the rise of federal deficits during the 1980s resulted from President Ronald Reagan's "tax cuts for the rich. "
Tax rates were cut. Tax revenues were not. More tax revenue was collected during every year of the two Reagan administrations than had ever been collected in any previous year in the history of the country. Nor was this experience unique.
When John F. Kennedy cut tax rates during the 1960s, tax revenues went up. The whole point was -- and is -- to encourage more economic activity, and more activity generates more tax revenues, even at lower rates. The same thing happened back in the 1920s.
Why then were there federal deficits during the Reagan administration? Because Congress spent even more money than the rising tax revenues brought in. There is no amount of money that Congress cannot outspend.
Although these were christened "the Reagan deficits," all spending bills originate in the House of Representatives -- and Ronald Reagan was never a member of the House of Representatives. Indeed, the Republicans never controlled the House of Representatives during either of the Reagan administrations.
Only after the Republicans gained control of the House in 1994 were there budget surpluses -- for which Bill Clinton took credit, even though he too had never been a member of Congress.
It is fascinating to see Congressional Democrats, who have for decades been spending the country into growing deficits, suddenly expressing shock at the current deficits that have occurred while George W. Bush was in the White House -- and the country was at war.
How serious are these deficits? As with all debts, the burden depends on what your income is. As a percentage of national income, today's deficits and national debt are far below what they were when Democrats were doing the spending.
Someone once pointed out that there are at least 50 colleges that claim to be among the top 25 colleges in the country. There is a similar congestion among the 400 "richest" Americans, as shown in data recently released by the Internal Revenue Service.
While much of the liberal media emphasized that these 400 highest income-earners had increased their share of national income between 1992 and 2000, only the Wall Street Journal pointed out that there are more than 2,000 people among these 400 "richest" Americans. How can you squeeze thousands of people into the top 400?
The key to this -- as to so much other nonsense that is trumpeted in the media about "the rich" and "the poor" -- is that we are not talking about the same people when we are making comparisons of different income brackets over a period of years. Most Americans do not stay in the same income bracket for even a decade, much less over a lifetime.
In the case of the Internal Revenue Service data on the 400 highest income-earners in the country, only 21 people were in that category throughout the nine years covered by IRS statistics. In other words, more than 2,000 people passed through this category in the course of nine years but fewer than two-dozen actually stayed there the whole time.
Other studies of income over time have shown very similar patterns of mobility -- not only in the United States but also in Britain, Holland, New Zealand, and other countries. But such facts are simply passed over in utter silence in the media and in much of academia.
Why? Because there is on the political left a huge vested interest in the concept of "class. " Class holds a sacred place in the new trinity of "race, class and gender" that has become a prevailing social dogma among the intelligentsia.
It is tough to admit that millions of people are constantly changing incomes and still talk as if we are all frozen into our classes or that we can be neatly divided into the rich and the poor, the haves and the have-nots.
Without that vision, what does the left have going for them? How can they justify seeking ever more power for the government, supposedly to redress our inequalities and injustices?
The outcries occasioned by the new IRS data are false in other ways as well. First of all, income is not wealth. People with much lower incomes than that earned by those passing swiftly through the top 400 can end up accumulating more wealth.
Indeed, some of the top 400 have high incomes in some years precisely because they cashed in some of the wealth that they had accumulated in previous years. They converted wealth to income and the media then verbally converted that income to wealth.
For most people, a home is their more valuable asset. Selling a house in California can make you instantly "rich" in statistical terms for that particular year. On the other hand, that matters only if you move to some place where you can buy another house much cheaper than in California.
My own income rose dramatically one year when I sold my house. But I bought another house with a bigger mortgage, so there was no real financial improvement. Still, briefly, I was part of the kind of statistics that so alarm liberals, though unfortunately not in the top 400.
As a result of inheritance taxes, many people who are left homes, farms or businesses have huge taxes to pay and not enough money to pay them -- unless they sell those homes, farms or businesses. That makes them "rich" -- for that year.
Moreover, any attempts to stop taxing assets that were already taxed when the original owner was alive are sure to be denounced as "tax cuts for the rich. " Ironically, all this demagoguery is about people who in most cases are not rich at all.
Even when you look at people who are genuinely rich, there is still turnover. When Forbes magazine published its first list of the 400 richest Americans in 1982, there were 14 Rockefellers, 23 du Ponts, and 11 Hunts. Twenty years later, there were 3 Rockefellers, one Hunt and no du Ponts.
But facts make no dent on those who are fixated on the sacred trinity of race, class and gender.
