The WSJ Opinion is predictable – Alan J Reynolds says that taxing the rich won’t work at helping to reduce the huge $14trillion US Deficit. Alan cites the fact that even when tax rates for the rich go up, tax revenue do not increase measurably [and Businessweek supplies the answer to that little puzzle – see below]. But what Alan also fails to note or explain are two fundamental phenomena:

1 – Income disparity is increasing



Note that the 95th percentile [or the top 5% of earners] have seen their income more than triple while everybody else has to be content with just under a doubling of incomes[or less]. In fact incomes in the 2000 to 2010 decade have been flat for 80% of all Americans]. But what is missing from this chart is the top 400 earners whose incomes soared by 46% but whose taxrates dropped in the same period.

2 – Tax rate for the all Income Clases Have Dropped



Even worse, BusinessWeek has shown that the tax dodges available to the top 5% of earners have proliferated within the last decade such that Alan’s prediction there will be no increases in tax revenues may well apply to the top 5% of earners unless tax reforms are also made as well as raising the top income tax rates. Neither does Alan discuss the fundamental flaw in the Republican arguments for deficit reduction by using spending cuts exclusively – tax reform and any tax increases, no matter how targetted are GOP forbidden.

Instead he offers “grow the economy” and “all boats will rise”. But then Alan completely ignores two facts. Thanks to the Financial Community’s continued foreclosure malfeasance, housing is still in a mess – and so the biggest nest egg of wealth for 80% of Americans is jeopardy as housing prices remained depressed. As well, the Business class in America has exported and outsourced work overseas to such an extent that job growth is barely trickling upward while greater swaths of middle income/college degree jobs are now being outsourced in such areas as legal work, clinical research, engineering and other traditional white collar/middle class jobs. So with the US Economy dependent on 70-80% of its growth based on domestic consumption, but with those incomes either stagnant or declining, Alan Reynolds is engaging in wishful thinking at best and deliberate reportorial malarkey on par with his News Corp Fox News partners.

But even more incredible is the following omission by Alan. There is the simple fact that the top 1% of earners come predominately from the financial community [nearly 50%] and over the past 4 years the financial community has and continues to benefit mightily from the public bailout at $3.1 trillion and counting with ultra-low interest rates from the Fed driving their fundamental cost of business to historical lows. David Stockman, Ronald Reagan’s Budget Director, describes the situation:

In what is no longer secret testimony to the FCIC (Financial Crisis Inquiry Commission), Federal Reserve Chairman Bernanke claimed that the Wall Street meltdown “was the worst financial crisis in global history” and that “out of maybe 13…..of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two”.

In effect, Stockman is saying that the jobs of Jamie Dimon , Lloyd Blankfein, and all but one of the topUS bankers and all their employees were gonzo if not for the Federal Bailout. Stockman continues with a harshly critical analysis of the continuing Fed preferential treatment for these same banks and the broader financial community. You would think that Alan would at least acknowledge that the Financial Community really owes on its taxes. And given the GOP lead attacks on teachers and public unions as Social Welfare Queens, Alan should set the record straight and tell readers where the really enormous “public fat cats” reside.

So one can only conclude that it must be that time of year again -Income taxes are due, Baseball has started, and Tax Dodgers are in full swing. And the worst of the Public-Money Sapping Fat Cats get full support from their paper, the Wall Street Journal, with another incomplete swing at the full facts of the tax case in the US. In short, Dow Jones strikes out again – and in the style of itsFox News “call it Opinion” rookie.