Pro-style QBs come back in focus

Someone must pay, and that someone is the upper class. Premiums are rising for white-collar workers. When Americans begin filling tax returns, upper income filers will discover there's a new Obamacare 3.8 percent tax on capital gains and other investment income, plus Medicare taxes have risen by 0.9 percent. That's a nearly 5 percent federal tax increase on the affluent.

Higher taxes on the affluent will fund new health benefits for ordinary people -- because Obamacare is, at heart, an income-transfer plan. It's widely believed America's affluent run the country and seize everything for themselves. When social-issues columnist Bob Herbert retired from the New York Times in 2011, his parting shot was a column pounding the table about how "the folks at the top are seizing virtually all the marbles," refusing to help average people. Yet the biggest social legislation of the past decade starts a new income-transfer system that taxes the folks at the top to reduce costs for average people. Obamacare disproves claims that America's government serves only the well-off.

And it's not just on health care where American government taxes the affluent to help average people. This new Congressional Budget Office study weighs government by social class -- how much various groups receive in benefits, versus pay in taxes. Economics columnist Robert Samuelson summarized the key findings:"If government taxes and transfers -- what people pay and get -- are lumped together, in 2006, the average elderly household received a net payment of $13,900; the poorest fifth of non-elderly households received a net benefit of $12,600; the richest fifth of non-elderly households paid out an average of $66,000."

Those figures are for 2006, before Obamacare, before big expansions in food-stamp and educational-benefit programs, and before several recent tax increases on the upper class. Surely this year, the elderly and the disadvantaged will receive larger net benefits, while top earners see an even larger net loss on government.

That's fine! The rich should pay so that the poor can live better. But when Obamacare's income-transfer impact takes hold, it must be factored into inequality claims. This graph is much discussed in Washington policy circles. Look closely: top-tier American inequality was worst during the early 1930s, then began a decline -- just as Social Security, the first important income-transfer program, went into effect. Around 1980, inequality started climbing again, including under the popular two-term liberal president, Bill Clinton. Now Obamacare will transfer income from the top to the bottom and lower-middle. Perhaps another 1930s-like transition is in store.

There's a case to be made that inequality trends are driven mainly by economic changes that have little to do with government. Beginning around the 1930s, industrialization caused employers to compete for skilled labor, which made hourly wages rise. Beginning around the 1980s, electronics caused skilled labor to drop in value, while the value of intellectual property soared. Or perhaps the fortunes of the labor movement explain the curves, as argued by Timothy Noah in his brilliant book " The Great Divergence." Whichever the cause, your columnist's wagers are two: Obamacare will prove popular, and inequality will decline.

Join the Discussion
blog comments powered by Disqus
You Might Also Like...