BuzzFlash: There are some startling statistics in your book. You mention that in 1970 -- and I'll quote this; it's a paragraph -- the top 1/100th of 1 percent of Americans had about 1 percent of the income, and the bottom third had more than 10 percent of the income. Now they are equal, and just 27,000 people have as much income as the bottom 96 million Americans. And the number of people it takes today to account for 1 percent of all income -- well, in 1970, it was more than 20,000 people, and today, it's less than 400. How has this happened?
David Cay Johnston: President Bush actually explained this really well to people. President Bush says that the way to measure tax burdens is how much of your money do you get to keep. Now without quarreling with his interpretation, let's examine what he says. How much of your money do you get to keep? The more that you get to keep, the more you have the freedom to either spend it on your lifestyle today or save and invest for the future. Well, for people at the very top of the income pile, their tax burden has been falling, and they have more and more income to save and invest. Now if you are in the top group -- if you're making $10 million or more -- you can't spend your entire income unless you're a gambling addict or, actually, I don't know how you could spend it unless you're a gambling addict, because, if you're buying oil paintings, those don't lose value unless you're a complete idiot. You mostly are investing that income, okay? Well, investing works, as anybody who got in a 401k plan knows, over the long term. Forget about the downturn of the market right now. It's a snowball. You add new contributions to the snowball and the market returns part of it to you. And pretty soon the magic of compounding interest is bigger than your contribution, and that snowball gets bigger and bigger, and your income gets bigger and bigger. So that if you are relieved of a substantial burden of taxes, and you have the capacity to save substantial amounts, you will get wealthier and wealthier.
Meanwhile, people in the middle class and the upper middle class are confronted by two things. A growing share of their income is going to taxes, and we have seen falling wages for the bottom, about 40 percent, of Americans; stagnant wages for the next 40 percent of Americans; infinitesimal growth in income for the next 10 percent -- that brings us to the 90 percent percentile -- and this incredible concentration of incomes at the very top. When one-third of Americans belonged to unions, more than two-thirds of Americans benefited from that because there were employers who did not want to have unions, so they paid premium wages -- and by the way, tended to get the very best workers as a result, as classic economic theory says they should. Lots of low-level managers at companies, their wages were basically set by the unions. To the extent that we set up the rules to shrink unions, we drive down wages -- and America is the only nation in the modern world that is driving down wages.
BuzzFlash: That's extraordinary.
David Cay Johnston: They get a 15-cent-an-hour job in Malaysia making Nike tennis shoes -- that is a wage growth strategy for Malaysia. We are the only country in the world that is in the pursuit of lowering wages. And it's been a very successful program. So you combine all of those forces, and you can see why the data, the official government data, which were right there for anybody to report on, but nobody in Washington announced: Oh, the top 400 taxpayers -- it's actually about a thousand people when you count the spouses and children -- the top 1,000 people in America are earning more than 1 percent of the income, when 30 years earlier, it took more than 25,000 people to earn the top 1 percent of income in America. No one announced it, and, therefore, to most of the news media, it's not a story.
BuzzFlash: Again, to play devil's advocates on a political level, let's take Howard Dean. Howard Dean says let's roll back the tax cuts, and pundits and your fellow journalists, the ones on television, say that's political suicide. The American public -- you just can't tell them you want to roll back tax cuts.
David Cay Johnston: Well, if that's what you tell the American public, of course people would be against that. That's like the question that was asked by the opponents of the estate tax. Since the estate tax represents third, fourth and fifth taxation of the same dollar, and it's destroying American jobs, are you in favor of the estate tax? And, surprise, surprise -- 80 percent of Americans or 90 percent said no, they're against that tax. The question's not true. The people you see on television, in most cases, are not serious journalists. And many of those who are serious journalists, they're not investigative or enterprising reporters; they're political reporters. And they're telling you the perceived political wisdom. I don't do that. I do enterprise work. I decide what I think is news based on what I find, and this is what I've done my whole career -- well, maybe not the first five years when I was learning. But I decide what's news, and I go persuade my editors that it's news, and get it in the paper.
It is one of the great bad things happening in America -- that we do not have the degree of skepticism in journalism that we had in the 70s and the 80s. It is this constant acceptance of this official version of events. There's a very tricky number, Mark, to get to the real key people who do not want to pay taxes in America: the Koch brothers, the Mars family, Richard Mellon Scaife. (J. Howard Marshall Koch was the doddering old man who married Anna Nicole Smith). The people who've been financing the anti-tax movement have hired a whole coterie of very smart people in Washington to figure out how to design arguments that favor what they want, but make it sound like it's good for you. And one of the best ones they've got is: The top 1 percent of Americans pay 37 percent of the taxes -- that's for the year 2000, more than 37 percent. Well, actually, the top 1 percent, who made 21 percent of the income, paid more than 37 percent of the income taxes. When you look at all federal taxes -- gift taxes, estate taxes, Social Security taxes, Medicare taxes, excise taxes on gasoline and things like that -- the top group only pays 25 percent, which isn't much more than their 21 percent share of the income.