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Even when they’re not driving business success, the rich make a massive contribution to the economy with their spending. Liberals like economist Paul Krugman have long argued that the key to economic recovery is for the federal government to boost consumer spending, which comprises the largest share of the economy. What they don’t acknowledge is that spending by the wealthy is now almost singlehandedly fueling the consumer economy. According to the Wall Street Journal, the top 5 percent of Americans by income now account for 37 percent of consumer spending. Given that tax increases will reduce the spending levels of the rich, it’s not obvious why proponents of consumer spending as an economic remedy believe them to be a good idea.
Tax-hikes will also hinder another of the many contributions the rich make: their charitable activities. It’s no coincidence that the leading charitable foundations in this country – including the Ford, Carnegie, Rockefeller and Gates foundations – were founded from the fortunes of rich capitalists. Not only that, but the rich contribute a disproportionate share of their income and time to charity relative to the rest of the population. Columnist Deroy Murdock notes that in 2008 the top 10 percent of taxpayers paid 42 percent of all charitable deductions, for a total of $72 billion that year alone. The rich also volunteer more than average Americans. In 2009, Murdock points out, 78.7 percent of wealthy people volunteered with charitable organizations, as compared with a national average of 26.8 percent. Still, that hasn’t deterred class warfare scolds like the New York Times from grumbling that upper-income earners are stingy and suffer from a “compassion deficit.”
Even if the rich didn’t make important and generous contributions to the social and economic order, there is presently no compelling justification for new taxes on the wealthy. After all, rich Americans already bear the overwhelming brunt of the tax burden. The top 1 percent pay nearly 37 percent of all federal income taxes. The top 10 percent pay nearly 70 percent of all federal income taxes. For all the populist outrage-peddling about secretaries paying more than their multi-millionaire bosses, the reality is that the 400 richest Americans pay almost as much in federal income taxes as do the 50 percent of taxpayers in the bottom of the income distribution. These tax receipts go a long way toward funding government programs, including those that benefit-low income Americans. It might be fitting if Obama occasionally acknowledged his debt to those who pick up the check for his spending. Instead, he wants to squeeze them even more.
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