Conundrums of “figures lie and liars figure” are part of life in a politicized world. But as managers of American industry, you must understand your responsibilities in this structure. You must also know about modern forces that work to socialize the U.S. capitalist system, which has brought prosperity to more millions in the world in the last century than all people who previously lived on Earth – the vast majority of living Americans being shining examples (the top 1% in human history). So it is worth a look at arguments offered in the biased U.S. media about “increasing income inequality” and the “vanishing middle class,” knowing there is no nice word for bovine leftovers – hereinafter termed BS.

Alan Reynolds, author of Income and Wealth, provides analyses that begin by asking, “what is middle class” and “the top 1% of what?” The oft-quoted Piketty-Saez report cited by leftist economists invokes Congressional Budget Office and federal (IRS) tax data saying that between 1979-2000 “average real income of the bottom 90% of American taxpayers fell by 7%.” For example, The Washington Post (2004) said that in 1967, 22.3% of households made between $35,000-$50,000, and this was down to 15% by 2003. This Post piece also stated that “real household income higher than $50,000 rose from 24.9% to 44.1% in the same period and that the percentage of household income lower than $35,000 fell from 52.9% to 40.9% in that period.” So the middle class moved up and out of this Post-defined “middle income” category. Nobody got poorer, and on an inflation-adjusted basis, the true middle (the three middle quintiles), was richer. Defining terms is important.

Consider also that from 1973-1981, marginal federal income tax rates for all workers rose substantially due to brisk inflation. They fell a bit until 1984 then really changed due to the 1986 Tax Reform Act. The capital-gain tax rate rose from 20% to 28% in 1987, so there was incentive for investors to be taxed at lower income versus capital gains rates. Add to this the fact that the above tax act made it more attractive for business taxpayers in this turnabout time to pay tax as “S” versus “C” corporations, 7.8% in 1981 versus 28.4% in 2004 and an annual 9% rate of increase since the 1986 Act. Also, when the socialistic media fuzzes the statistics with data relating to tax units instead of taxpayers, raise the BS flag. There is no such thing as a tax unit in IRS or Congressional Budget Office analyses. It is a creation to manipulate data to assure outcome. And there is no accounting for the fact that transfer payments, which are a growing part of income, are acknowledged. There is little evidence of a significant or sustained increase in the inequality of U.S. incomes, wages, consumption or wealth over the past 20 years as compared to domestic or other nations’ conditions.

Following are important factors and the summary effect:

The truth is that shifting in tax reporting (corporate to individual) accounts for more than half the apparent increase of income in the “top 1%” over the past 20 years. Deferred investment income in tax-favored savings plans accounts for most of the remaining unexplained inequality, and when the unaccounted transfer payments so conveniently forgotten by those pushing a socialistic agenda in their studies are in focus, well, there you have it – a lesson in understanding BS.

Industry leaders must understand the true thrust of harping on this inequality agenda by the media, and that is to consolidate government controls so that taxation can redistribute national wealth. Don't let more failed, socialistic BS happen. IH