Who’s Rich, Part 2

by | Jul 16, 2003

Someone once pointed out that there are at least 50 colleges that claim to be among the top 25 colleges in the country. There is a similar congestion among the 400 “richest” Americans, as shown in data recently released by the Internal Revenue Service. While much of the liberal media emphasized that these 400 highest […]

Someone once pointed out that there are at least 50 colleges that claim to be among the top 25 colleges in the country. There is a similar congestion among the 400 “richest” Americans, as shown in data recently released by the Internal Revenue Service.

While much of the liberal media emphasized that these 400 highest income-earners had increased their share of national income between 1992 and 2000, only the Wall Street Journal pointed out that there are more than 2,000 people among these 400 “richest” Americans. How can you squeeze thousands of people into the top 400?

The key to this — as to so much other nonsense that is trumpeted in the media about “the rich” and “the poor” — is that we are not talking about the same people when we are making comparisons of different income brackets over a period of years. Most Americans do not stay in the same income bracket for even a decade, much less over a lifetime.

In the case of the Internal Revenue Service data on the 400 highest income-earners in the country, only 21 people were in that category throughout the nine years covered by IRS statistics. In other words, more than 2,000 people passed through this category in the course of nine years but fewer than two-dozen actually stayed there the whole time.

Other studies of income over time have shown very similar patterns of mobility — not only in the United States but also in Britain, Holland, New Zealand, and other countries. But such facts are simply passed over in utter silence in the media and in much of academia.

Why? Because there is on the political left a huge vested interest in the concept of “class.” Class holds a sacred place in the new trinity of “race, class and gender” that has become a prevailing social dogma among the intelligentsia.

It is tough to admit that millions of people are constantly changing incomes and still talk as if we are all frozen into our classes or that we can be neatly divided into the rich and the poor, the haves and the have-nots.

Without that vision, what does the left have going for them? How can they justify seeking ever more power for the government, supposedly to redress our inequalities and injustices?

The outcries occasioned by the new IRS data are false in other ways as well. First of all, income is not wealth. People with much lower incomes than that earned by those passing swiftly through the top 400 can end up accumulating more wealth.

Indeed, some of the top 400 have high incomes in some years precisely because they cashed in some of the wealth that they had accumulated in previous years. They converted wealth to income and the media then verbally converted that income to wealth.

For most people, a home is their more valuable asset. Selling a house in California can make you instantly “rich” in statistical terms for that particular year. On the other hand, that matters only if you move to some place where you can buy another house much cheaper than in California.

My own income rose dramatically one year when I sold my house. But I bought another house with a bigger mortgage, so there was no real financial improvement. Still, briefly, I was part of the kind of statistics that so alarm liberals, though unfortunately not in the top 400.

As a result of inheritance taxes, many people who are left homes, farms or businesses have huge taxes to pay and not enough money to pay them — unless they sell those homes, farms or businesses. That makes them “rich” — for that year.

Moreover, any attempts to stop taxing assets that were already taxed when the original owner was alive are sure to be denounced as “tax cuts for the rich.” Ironically, all this demagoguery is about people who in most cases are not rich at all.

Even when you look at people who are genuinely rich, there is still turnover. When Forbes magazine published its first list of the 400 richest Americans in 1982, there were 14 Rockefellers, 23 du Ponts, and 11 Hunts. Twenty years later, there were 3 Rockefellers, one Hunt and no du Ponts.

But facts make no dent on those who are fixated on the sacred trinity of race, class and gender.

Thomas Sowell has published a large volume of writing. His dozen books, as well as numerous articles and essays, cover a wide range of topics, from classic economic theory to judicial activism, from civil rights to choosing the right college. Please contact your local newspaper editor if you want to read the THOMAS SOWELL column in your hometown paper.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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