Millionaire Myths, Indeed

September 26, 2011 at 3:07 pm

The Washington Post’s “Five Myths About Millionaires” piece yesterday by John Steele Gordon did more to perpetuate myths than dispel them.  Below are corrections to each of his five points:

  1. Gordon confuses total wealth and annual income to claim that millionaires aren’t really rich, arguing that “Today, $1 million in the bank generates only about $50,000 per year in interest.”  Anyone paying attention to today’s tax debate understands that President Obama’s proposed “Buffett Rule” would apply to people with annual incomes above $1 million, not total assets above that amount.  Even in 2011, $1 million in income a year is still rich — in fact, it’s enough to put you in the top 0.3 percent of all American families.
  2. Gordon may be correct to say that some millionaires don’t feel rich (though here, too, much of his “evidence” concerns people with million-dollar assets, not million-dollar incomes).  But in any event, people who don’t feel rich despite making over $1 million a year should consider this: the average Bush tax cut for their income category this year is $136,000, or nearly three times what the average American family makes in an entire year.
  3. In stating that millionaires as a whole don’t pay lower taxes than middle-class Americans, Gordon is attacking a straw man.  As we’ve explained, a significant group of people with incomes over $1 million — those who receive more than a third of their income from capital gains and qualified dividends — pay a smaller share of their incomes in federal income and payroll taxes than large swaths of the middle class.  The Buffett Rule states that no millionaire should pay at below the typical middle-class rate.
  4. Millionaires don’t all share the same political beliefs, Gordon argues.  That’s certainly true — many, like Warren Buffett, believe that they should pay higher taxes to contribute to our government and deficit reduction, while others want Congress to eliminate taxes on their capital gains.  But, it’s not relevant.  This diversity of opinion says nothing about what’s the best policy.
  5. Finally, Gordon argues that a millionaire’s tax would seriously limit investment, and he holds up the Bush tax cuts as evidence that large tax cuts boost jobs and the economy.  But as my colleague Chad Stone has noted (and the graph shows),“job creation and economic growth were significantly stronger in the recovery following the Clinton tax increase [on upper-income Americans] than they were following the 2001 Bush tax cut.  And the Clinton policies produced a balanced budget.”
  6. Taxes No Barrier to Economic Growth

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More About Chuck Marr

Chuck Marr

Chuck Marr is the Director of Federal Tax Policy at the Center on Budget and Policy Priorities.

Full bio | Blog Archive | Research archive at CBPP.org

7 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. jeff hoffman #
    1

    “You don’t expect complete nonsense in a supposedly first-rate national newspaper.”… unless you read Dean Baker. Then you come to expect it.

    • Sd #
      2

      Tax cuts for the rich do nor work at all

  2. ezra abrams #
    3

    one argument that mankiw makes explicitily is to take the CBO data on tax rates, which seems to be the accepted data source on how much diff quintiles and %s pay, and make the following argument:
    in the cbo data, the wealthy pay the same % of income in taxes because the cbo calculates their imputed corp tax rate – they assign to owners of stock (the wealthy) the cost of corp taxes.
    amusingly, mankiw, a few posts later, links to piece that gives the std argument that corp taxes should be abolished cause they just get passed to consumers….consistency is indeed a hobgoblin, but not of foolish minds

  3. 4

    Didn’t the fabulous economy of the 90s occur because of the internet boom, not higher taxes on the wealthy?

    “Today some decry President Obama’s decision to allow the top-tier Bush tax cuts to lapse, arguing that ‘one should not cut spending in a recession.’ And it’s true: jobs will be lost.” – James Galbraith

    “… tax increases slow growth by pulling money out of the economy.” – Dean Baker

  4. Chris #
    5

    What is most amazing is that a respectable newspaper would print such a piece without doing its own checking. You don’t expect complete nonsense in a supposedly first-rate national newspaper.

  5. Tom Baxter #
    6

    One half truth not mentioned is that nominal income tax receipts increased after the Bush tax cuts, but in real terms adjusted for inflation receipts fell.

  6. 7

    Excellent piece, Mr. Marr. You’ve proven to be a valuable asset in dispelling the half-truths perpetuated by the Millionaires club.



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