There?s nothing new here. Through 2001, a tiny one-tenth of 1 percent of U.S. taxpayers generated a hefty 16 percent of total tax collections. That?s brainpower plus initiative, aided and abetted by the incentive to keep more of what you earn and thus work with more intensity and purpose. Meanwhile the top 1 percent paid 34 percent of tax collections, the top 5 percent paid 53 percent, the top 10 percent paid 65 percent, the top 25 percent paid 83 percent, and the top 50 percent paid 96 percent. These ?rich people? are government?s best friend.
This week in the Wall Street Journal, Gotz Aly, a professor of Holocaust research at the University of Frankfurt, talked about the ?rotten achievement? of the German economy, where policymakers obsess over the ?equalization of living standards.? Germans have an ?equality sickness? that makes them dependent on the welfare state. Is that what David Cay Johnston has in mind for America?
Nations engaged in punishing the rich and leveling income and wealth through high taxes and resource redistribution have always failed. These were the goals of the socialist and communist regimes following WWII, in particular old Russia and its satellites. The size and scope of these failures, and the related deprivation of democracy and human rights, ultimately led to the downfall of communism and the rise of free-market capitalism, with its attendant privileges of free-election democracy and sweeping new human rights. This very transition is now occurring in the once darkest corners of the Middle East.
The economic failure of income- and wealth-leveling is more and more apparent today. The stagnant economies of socialist Old Europe are falling further and further behind the free-market capitalist models of the U.S. and Britain. Milton Friedman?s great 1962 book, ?Capitalism and Freedom,? should be read by all inhabitants of Old Europe. He offered a way out. Twenty-odd years later, Ronald Reagan and Margaret Thatcher put Friedman?s ideas into political and economic action. The startlingly positive results are being copied by India and China, if not inevitably by France, Germany, and Italy.
This is a thought for the ages ? and for Mr. David Cay Johnston.