The Left is at war with economic reality. The intellectual poverty of the Left — which is also a moral poverty — is evident in the fact that its leaders are much more intensely interested in incomes at the top than those at the bottom. Examples are not difficult to come by: Senator Elizabeth Warren is visibly agitated by Jamie Dimon’s recent raise, the AFL-CIO maintains a website dedicated to executive compensation, Barack Obama avows that “at a certain point, you’ve made enough money,” et cetera ad nauseam. The entire rhetoric of inequality is simply an excuse to rage about incomes at the top, a generation’s worth of progressive shenanigans having failed to do much about those at the bottom.
It is the case that incomes at the top have gone up while those in the middle and at the bottom have stagnated or declined in real terms. It is not the case that incomes at the top have gone up because those in the middle and at the bottom have stagnated or declined, nor is it the case that incomes in the middle and at the bottom have stagnated or declined because incomes at the top have gone up. There is a relationship between the two phenomena, but it is not the relationship that progressives imagine it to be.
Neither the American tax code nor other features of our economic policy are notably generous to high-income and high-wealth people by the standards of the developed world. American businesses labor under the highest business income-tax rate in the world and one of the business tax codes most riddled with political favoritism. At 40 percent — compared with an OECD average of 25 percent — our business income-tax rate is nearly double that of Sweden, and more than twice that of Switzerland, which does not tax capital gains. Our top personal income-tax rate is higher than that of New Zealand, which manages to finance an effective national government out of the proceeds, and much higher than that of very competitive countries such as Singapore. Taken together, our tax and entitlement systems are about as redistributive as typical European welfare states. What is unusual about the United States is not that the rich are taxed so lightly but that the middle class is taxed so lightly, at least relative to European practice.
Which is to say, those who endorse policies such as higher taxes on the wealthy as an antidote to income inequality are missing the picture.