America is hurting but it’s not for a lack of money
Progressives claim that the top 1% of income-earners continue gobbling up more of the nation’s income while the rest of America falls behind. But that liberal trope is being exposed as tripe. New research shows that the top 1% of income earners account for the same portion of after-tax income today that they did in 1960.
This dispels leftist myths on income, like those popularized by Thomas Piketty and Emmanuel Saez, who claimed that the top 1% went from earning 8% of the nation’s income in the 1980s to 27% by 2021.
But that tripling of the top 1%’s share is derived from deeply flawed methodology, with such serious errors as adding people who are not in the top 1% into that group’s aggregate income figure. This analysis comes from research published September 29, 2023, by the Treasury Department’s Gerald Auten and David Splinter from Congress’s Joint Committee on Taxation.
An accurate — and honest — analysis shows that the top 1% of income earners have about 8% of the nation’s after-tax income, about the same as in 1960. In fact, that figure has been flat for the six decades between then and now.
This is a shot below the water line to the leftist talking point that the "greedy 1%" have been exploiting the masses for 50 years in a cycle of grinding poverty. It is not the accumulation of more wealth by fewer people that has caused countless societal ills. People are not looting Foot Locker because they’re starving and need a loaf of bread.
Such instances of ransacking retailers — especially for luxury goods — are examples of how the primary problems in American society are social and not economic.
To be sure, there is some interplay between those two categories. President Lyndon Johnson’s welfare state provided economic incentives to have out-of-wedlock births, and that reduced both marriage rates and income mobility among lower-income groups. In the wake of such disastrous incentives, all the societal ills connected with fatherless homes exploded.
Conversely, when President Bill Clinton signed welfare reform and removed some of those injurious incentives, those same societal ills briefly became less prevalent.
That fact notwithstanding, we must acknowledge the extent to which moral decay has contributed to — or outright caused — various evils in American society. Petty theft is rampant in our cities. Many urban areas have become killing grounds with homicide rates matching active war zones. Violent carjackings are increasingly common. Not even the elderly are safe from attack.
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These are not problems that can be solved by taxing the rich or reforming government spending. Rather, such crimes are symptoms of America’s moral decline. "Our constitution was made only for a moral and religious people," President John Adams pointed out. "It is wholly inadequate to the government of any other." How right he was.
This highlights why it’s so important that economic research produces accurate results. When we ascribe blame to a boogeyman, like the top 1% gobbling up all the nation’s income, we end up chasing specters. If we can’t correctly identify the source of a problem, how can we ever hope to solve it?
And just as research can show us what is or is not a likely cause of a problem, it can also show us what is or is not working to fix that problem. For example, this latest study on the share of income earned by the top 1% illustrates how the tax code has become much more progressive while societal ills have worsened.
The top 1%’s share of before-tax income has risen, but not their share of after-tax income. Clearly, "soaking the rich" hasn’t helped the poor or reduced the rate of out-of-wedlock births.
America would do well to remember that although the discipline of economics can help identify social problems and their causes, it can’t solve them. It will take a moral revival in this country to do that.