Tuesday,
June 26, 2001
by Jacquelyn Horkan, Editor
BAD IDEAS NEVER DIE — THEY JUST ATTRACT BILLIONAIRES
Thomas Malthus left this world in 1834 but the
influence of the author of the so-called dismal theorem has yet to fade.
According to the Malthus, the one billion
humans on earth in the early 19th century would soon overrun
the planet’s ability to feed them. Malthus predicted a "gigantic
inevitable famine" that would, "with one mighty blow, level …
the population."
After two hundred years, the earth now
supports six billion people, grain production sets new records every year,
and caloric intake continues to rise. Malthus’s theory has been
factually discredited but his pessimism still draws devotees, including
three rich Americans with a combined total value of $98 billion.
Bill Gates, Warren Buffet, and Ted Turner are
devoting billions to solving the "problem" of too many people,
despite worries that the world’s population will likely start dropping
in the next 40 years or so. In other words, the imminent threat is
depopulation, not over-population. Depopulation threatens economic
expansion, by restricting the pool of available workers, and the existence
of social welfare programs, such as Medicare and Social Security, that
rely on a large numbers of young workers to fund benefits for retirees.
The oddity of the Malthusian concerns of
Gates, Buffet, and Turner is not limited to their devotion to a
non-existent crisis. Rather, these men, who created their wealth through
the free market, have aligned themselves with a cause supported by
left-wing extremists of all persuasions, from anti-globalists to
neo-Marxists to anarchists to the environmental fringe.
These crusaders oppose corporate use of
natural resources to satisfy consumer demands. They object strenuously,
and sometimes violently, to capitalism and its marshalling of technology
and private property. They belong to the activist corps that, among other
things, forced Lowe’s and Home Depot to agree to discontinue the sale of
products derived from "old growth" forests and public lands.
Thus customers at these stores lose access to inexpensive, high-quality
lumber and paper products.
Businesses that respond with capitulation to
public relations problems ginned up by activists, become passive partners
in a scheme with the ultimate goal of destruction of the free-enterprise
system. Let’s not forget that this same system responded to a
500-percent population increase over the last two centuries with
technologies and methods that produced abundance and rendered Malthus
obsolete. It deserves better treatment.
DRAWING THE WRONG LESSON
Jim Horne has had his ups and down in the last
couple of months. The Orange Park Republican just resigned his Senate seat
to assume the leadership of Florida’s new public-education system.
Before that he found himself embroiled in one of those mini-controversies
that can spin out of control.
In the closing days of the session an item
slipped into the budget bill would have denied transportation money to
Leon County unless a series of speed bumps were removed from a residential
stretch on the road connecting the state Capitol to the Tallahassee
airport. As appropriations chairman, Horne took responsibility for the
speed-bump clause, which was later repealed, and bore the full brunt of
the umbrage for this vexatious meddling in local affairs..
As it turns out, the author of the speed-bump
amendment was Senate President John MacKay (R-Bradenton). St. Pete
Times columnist Lucy Morgan reports that Horne, who drives to and from
Tallahassee, had never traveled over the stretch of road in question. In
fact, he didn’t even know the item was in the budget until he saw the
printed version.
Now Horne is under fire for a $300,000 tax
break he inserted in the budget for Coca-Cola, which bottles its Dasani
brand of water in Jacksonville. The move has been denunciated as
pork-barrel politics and Sen. MacKay has cited the episode as evidence of
the difficulty the Legislature will face in reforming the state’s tax
code. Actually it is neither pork nor evidence.
Dasani is the only brand of bottled water sold
in the state that is subject to the sales tax because the treatment method
used qualifies the bubble-free liquid as a carbonated beverage. Horne’s
tax exemption merely extends the tax treatment of bottled water to Dasani,
and eases the burden on stores that had to handle one brand of water
differently from all the rest.
Instead of signifying the difficulty of
reforming a complex tax code, the Dasani episode illustrates the
difficulty of administering a complex tax code in desperate need of
reform.
TAX GAP WIDENS
In late May, the Congressional Budget Office
issued an exhaustive study of trends in Americans’ income and tax burden
from 1979 to 1997 (available at http://www.cbo.gov).
Soon after, the liberal think tank Center on Budget and Policy Priorities
released its analysis of the CBO study (available at http://www.cbpp.org),
drawing a conclusion different from that indicated by the CBO data.
The CBO study showed a 157-percent increase in
after-tax income for the wealthiest one percent of households, while those
in the lowest quintile (or 20 percent) actually experienced an
inflation-adjusted drop in after-tax income of $100 (1997 dollars) from
1979 to 1997. While this last number may seem to refute the "rising
tide lifts all boats" theory of economic expansion, it’s important
to remember that those among the poorest 20 percent of Americans in 1979
most likely did not stay there long. According to the CBO, 12.5 percent of
the people move up at least one quintile in any one year while another
12.5 percent move down.
The Center on Budget and Policy Priorities,
however, dismisses income mobility as a negligible factor. The center also
parts ways with the CBO on changes in the tax burden. According to the
center, the rich are not only getting richer at the expense of the poor;
the rich are benefiting from a lower average effective tax rate (taxes as
a share of income). Indeed, the effective tax rate fell for all income
quintiles, but most drastically among the top one percent.
In making its political point, however, the
center had to ignore another important discovery by the CBO. In 1997 the
top 20-percent of households earned 53 percent of pre-tax income, up from
46 percent in 1979, but their share of the federal tax burden also
increased, from 57 percent to 65 percent. Households in the bottom three
quintiles paid seven percent of federal taxes. The richest 20 percent of
households face an effective tax rate more than five times that of the
lowest quintile. Households in the lowest quintile with children actually
benefited from a growing negative tax rate, a result of the earned income
tax credit, by which the federal government pays them money rather than
collecting income tax from them.
A progressive tax code — one that levies
higher taxes on greater wealth — is the lodestar of liberals because,
theoretically it evens the scales by redistributing wealth to those on the
lower rungs. The expansion of the earned income tax credit has increased
the progressivity of the federal tax but, as the CBO report suggest,
progressivity has failed to live up to its promises.
Another important point: The increase in the
share of income going to the wealthiest Americans is fueling the budget
surplus.
The conclusion conspicuously avoided by the
Center on Budget and Policy Priorities is simple. Soak-the-rich tax
policies don’t help the poor. Using the tax code to redistribute income
from the haves to the have-nots doesn’t work. More income and fewer
taxes is what fuels the economy and funds the government.
