- The Washington Times - Wednesday, September 8, 2004

Last month, the U.S. Census Bureau reported its findings on income and poverty. Median real income remained constant between 2002 and 2003 at $43,000; the official poverty rate rose slightly from 12.1 percent to 12-1/2 percent for a total of 36 million Americans. Poverty rates by race remained unchanged at 8 percent among whites, 24 percent among blacks and 22 percent among Hispanics.

Daniel H. Weinberg, Census division chief, said income inequality is unchanged: The lowest 20 percent of households ($18,000 and below) earn 31/2 percent of national income and the highest 20 percent ($86,900) about 50 percent.

The poverty report gives vice-presidential hopeful Sen. John Edwards a little fodder for his “Two Americas” stump speech. That’s the one where he says, “[There’s] one America that does the work, another America that reaps the reward. One America that pays the taxes, another America that gets the tax breaks.” This is demagoguery and unadulterated dishonesty that can only appeal to the misinformed and ignorant.

Let’s look at who doesn’t pay taxes. According to a study by Scott Hodge, president of the D.C.-based Tax Foundation, and his colleagues, 41 percent of whites, 56 percent of blacks, 59 percent of American Indians and Aleut Eskimos, and 40 percent of Asians and Pacific Islanders will have no 2004 federal income tax liability. The study concludes, “When all of the dependents of these income-producing households are counted, there are roughly 122 million Americans — 44 percent of the U.S. population — outside the federal income tax system.”

Who pays federal income taxes? The top 20 percent of income earners pay 80 percent, and the top 50 percent pay 96-1/2 percent of total federal income taxes.

Given these figures about who does and does not pay federal income taxes, what are we to make of John Edwards’ stump speech? He’s right in one sense. One group of Americans — those at the top — work and pay virtually all federal income taxes. Another group — those at the bottom — work and pay little or no federal income taxes.

There’s another issue about income inequality. If it’s your vision that out there somewhere there’s a pile of money to be divided among Americans, the reason the top fifth of Americans have much more than the bottom fifth is that they got to the pile of money first and took an unfair share. Justice, of course, would require confiscating their ill-gotten gains and redistributing it to the rightful owners. But in a free society, income is mostly determined by one’s ability and willingness to produce goods and services that satisfy his fellow man.

The top fifth of income earners (earnings more than $84,000) are not only more productive, with higher skills and education, than the bottom fifth of income earners, they work more hours and have more people in their household working.

Something else gets little attention: There’s considerable income mobility in our country. According to Internal Revenue Service tax data, 85.8 percent of tax filers in the bottom fifth in 1979 had by 1988 moved on to a higher quintile, and often to the top quintile. Income mobility goes in the other direction as well. Of the people in the top 1 percent of income earners in 1979, more than half, or 52.7 percent, were gone by 1988.

Here’s my question: What are we to make of politicians and other charlatans and quacks who are knowingly dishonest and use the politics of envy to exploit American ignorance for political gain? Regardless whether you’re for George Bush or for John Kerry winning the White House, do you think politicians running on envy bodes well for the future of our country?

Walter E. Williams is a nationally syndicated columnist.

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