Magazine article Insight on the News

When Greed Keeps People in Their Places

Magazine article Insight on the News

When Greed Keeps People in Their Places

Article excerpt

The charge from congressional Democrats that the GOP's "reckless" tax-cut proposal will "disproportionately benefit the wealthy" reminds me of a dispute that happened between two of my students.

At the start, both students worked in the same pizza shop, for $6.25 an hour. One of the students, on his own, came up with an idea for a unique summer business. We discussed the pitfalls and benefits of owning and running a small business: the high failure rate for start-ups, liability insurance, tax rules, labor regulations, staffing, long hours, etc. By the beginning of summer, he was up and running and putting in long days, making sales contacts by day, doing the necessary paperwork at night. His first employee was his coworker at the pizza shop. Within a month, business was booming and everyone was benefiting from an entrepreneurial idea that turned into a business success. Customers were satisfied, his part-time student employees were earning $15 an hour, including his friend from the pizza shop, a nice jump from $6.25. The entrepreneurial student's economic reward? An average of about $50 per hour.

It wasn't long before the student entrepreneur told me that his friend had walked out, gone back to the hot kitchen and tossing pizzas for $6.25 an hour. "He thought the money wasn't `fair,' thought he was getting a bad deal, because I was making more money than him." A smarter path for his pizza friend might have been to learn the business and then break out on his own, like Wendy's following McDonald's. Instead, he retreated to a place with a smaller wage gap, at less pay. The whole thing reminded me of the politics-of-envy in the old Soviet Union, where a militant egalitarianism succeeded in delivering not much more than equal misery.

What the GOP tax cut would deliver is an outcome not unlike that of what happened when the two students left the pizza shop, i.e., higher paychecks along with a bigger income gap. "The wealthiest Americans -- the I percent of taxpayers who have incomes of more than $300,000 a year -- would receive fully one-third of the tax relief that the bill would provide," says Rep. William J. Coyne, a Pennsylvania Democrat, explaining his opposition. "Taxpayers in the top 1 percent would receive tax breaks averaging more than $46,000 a year." People at the top, in short, get a free Lexus, while those at the bottom get peanuts.

What Coyne doesn't say is that the top I percent of American taxpayers, earning 17 percent of total national income, pay 32 percent of total federal income taxes. …

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