Originally posted October 21, 2015.
During the Democratic debate last week, the candidates beat the income inequality drum before peddling an endless list of freebies to be paid for by punitive taxes on the rich. The strident progressive cry is that the rich don’t pay enough and our social-welfare programs are too stingy. But as Cato Institute’s Michael Tanner points out, they have it all wrong. In truth, Mr. Tanner writes, the rich (those who earn about 19% of U.S. income), pay more than 42% of fed income taxes. Furthermore, between the Feds and the states, the U.S. spends nearly $1 trillion on our welfare and anti-poverty programs. “But why let a few facts get in the way of a good narrative?”
Critics of inequality would have us believe that rising inequality is responsible for poverty. But at a time of increasing inequality, world poverty has never been lower. The researchers (World Bank) project that fewer than 10 percent of the world’s population will live in extreme poverty this year.
The Left also believes that most rich people don’t earn their wealth, they inherit it, resulting in a new aristocracy. That was the central thesis of Thomas Piketty’s oft-cited book, Capital in the Twenty-First Century. In reality, however, roughly 80 percent of American millionaires are the first generation of their families to have that much money. Most of the rich are entrepreneurs who earned their wealth through hard work.
Read more from Mr. Tanner here, who explains why capitalism works but crony capitalism doesn’t.