The Rich Get Poorer,And The Poor Get Poorer?
I have been reading for some time how I have been getting better off (in the top 5% of income) over the past 10 years ("The rich are richer--and America may be the poorer," Economics, Nov. 18). Funny though, I haven't actually seen it.
The biggest fiction is that the Reagan "tax cut" benefited the rich--dropping the 50% top tax rate to 28%. I was against this tax cut as soon as it was suggested. Because what was also cut were a lot of tax shelters built into the tax structure to get investors to put money into risky segments of the economy, such as oil and gas drilling, low-income housing, etc. The effect of the elimination of tax shelters was to more than triple my federal and state taxes, money that I will never see again.
On top of this, none of these tax shelters was grandfathered. So the tax system rewarded investment in risky areas for many years, and some people such as myself had followed the government's lead to a tune of around a half-million dollars. Suddenly, tax shelters were eliminated, and now I'll be lucky to get 10c on the dollar.
In my personal case, I have become much poorer over the past 10 years in in-pocket income as well as value of my investments. And now everyone is talking about soaking the rich even more. I would love to go back to the 1970s and 1980s, when us rich were not so rich. My pocketbook and balance sheet would very much appreciate the change.
Hal F. Mather
You argue that everyone agrees that "the widespread technological and competitive changes that occurred during the 1980s induced a sharp increase in the rewards for skill and education." Then you conclude that "income distribution," "income inequality," and "child poverty" are the root causes of America's woes.
If that's the case, incomes haven't become "more unequal"--as if, in open economies, supply and demand have to be equal. The old supply and demand patterns are gone, and new ones need to be identified, adapted to, and capitalized on. "Income distribution" is not the issue. A global pool of less skilled workers depressing demand for less skilled U.S. workers is. What does this mean for American companies and workers?
Money can't be made the old way. "Competitiveness" means doing it better for less, so learn how to do it better for less. Old assumptions and expectations are dead, and the new ones are global. So either keep the old ones and learn to live with less, or learn the new ones and have the problems of learning to live with more.
Solve your own problem and enjoy long-term solutions or let others solve it and suffer short-term solutions. Protectionism tells us nothing about how to cope under new conditions. Losers depend on help; winners only ask that the conditions be created that let them solve their own challenges and opportunities.
"The government" can never improve the competitive skills of any one individual worker or firm.
Henry E. Adams
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