As the Bush Administration moves towards tax reform that would tax consumption instead of income, many liberals are opposing it because they claim it would benefit the rich too much.
Liberals make the mistake of assuming that those who are poor today will always be poor, and those who are rich will always be rich. This is really their principal justification for income and wealth redistribution policies. However, new data reported in the latest Economic Report of the President show that there is substantial mobility up and down the income ladder.
The Council of Economic Advisers looked at what rate taxpayers faced in 1987 and again in 1996.
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The high degree of income mobility in American society is a key reason why many of the poor and middle class oppose high taxes on the rich—70 percent of Americans favor abolishing the estate tax, for example, even though it affects just 2 percent of the population. Implicitly, they know that they or their children might one day be rich and have to pay this tax. They also know that poor people don’t create jobs; rich people do.
Adopting a consumption-based tax system will help more Americans become rich. That is another reason why liberals oppose it.
