“The U.S. has nearly ONE-THIRD of the world’s billionaires,” Rep. Pramila Jayapal, who represents Seattle, tweeted last week. “Meanwhile, our poverty rate is the 4th highest in the world. Tax the rich.”
You probably wouldn’t be surprised to hear that she deleted this tweet after a barrage of criticism. There are so many falsehoods and non sequiturs contained in it that you might want to think twice before packing your bags and heading for Mexico as the land of opportunidad.
Still, her remark reveals the parallel mental reality in which socialists live.
It is only a minor quibble that the United States is not home to one-third of the world’s billionaires (it’s closer to one-fourth). But more importantly, their billionaire status doesn’t harm anyone else. This is how transactions work in a free market. Bill Gates and Jeff Bezos have money not because they stole from or exploited others but because literally billions of people have voluntarily handed them cash for the goods and services they invented and offered.
Second, the U.S. does tax the rich, as we recently noted in detail. When you look at actual income taxes paid on aggregate by income percentile, the wealthy pay far more and the poor pay far less than their respective shares of the nation’s income.
The U.S. has the most progressive tax code in the world. Yes, a very small handful of extremely wealthy individuals each year manage to pay surprisingly little in taxes, but that’s not because tax rates are too low. It is because of special interest loopholes and complications that politicians (Democrats especially) are constantly inserting into the tax code. It isn’t the poor who collect credits for electric vehicles or itemize their deductions, after all.
As for the claim about U.S. poverty, it is even more ludicrous. There is no reasonable understanding of poverty that could rank the U.S. behind Afghanistan or Laos, let alone Burundi. If the U.S. really had the fourth-highest poverty rate, that would probably come as a huge surprise to the tens of thousands of Haitians currently endangering their own lives to sneak across the border. Cuba does not need to brace itself for any surge of American economic refugees.
Even if Jayapal’s claim were based on the U.S. — the government’s domestic poverty-level standard is set at $26,500 for a family of four — it still falls flat. This standard is obviously inappropriate for global comparisons anyway, but with only about 11% of Americans living below it, there are dozens of countries (including the United Kingdom) that deem a higher share of their own residents to be impoverished.
But Jayapal’s most ludicrous misconception, which she shares with snappy dresser Alexandria Ocasio-Cortez, is that taxing the rich somehow improves the lives of the poor.
Even accepting the dubious premise that government social spending improves the lives of the poor (it certainly isn’t doing much for the growing tent city that Jayapal represents), lack of funds is not in any way constraining social spending. The U.S. government has been running massive deficits for decades. Any connection between how much the government collects and how much it spends was severed long ago. No one in either political party seems eager to bring them back together any time soon.
Also, note that even the complete confiscation of all U.S. billionaires’ wealth, an estimated $4 trillion in all, would put only a modest dent in the national debt.
The good news that leftists like Jayapal and Ocasio-Cortez hate is that poverty is in retreat everywhere. Living standards have improved, and incomes have risen dramatically in recent decades. And it’s all thanks to the progress of free markets in creating and spreading wealth even before any government redistribution takes place.
Aside from oil-rich Norway and a handful of the most generous welfare states, there is no better place to be poor than in the U.S. Not only are there abundant social services (transfer payments are not counted against the poverty rate) and charities, but there is a job available right now at above-poverty wages for anyone capable of working.
Meanwhile, the average U.S. family in poverty has a car, air conditioning, cable, and two color-television sets. To be poor in the U.S. is to enjoy a lifestyle far better than in other places. The hundreds of thousands of illegal immigrants risking their lives to enter the U.S. each month are acutely aware of this fact.
On the world scale, extreme poverty has been in full collapse for 40 years. It fell from 42% in 1981 to just 9% today — and that would actually be even lower if not for COVID-19.
The single largest contributor to the sharp, historic decline in poverty has been the rejection of Jayapal’s socialist ideology. The abandonment of Marxist principles and the embrace of free markets and international trade in the late 1970s helped reduce China’s extreme poverty rate from 88% in 1981 to less than 1% today, lifting a billion people out of poverty.
Taxing the rich doesn’t reduce poverty, but free markets do.
