BY THE WAY -- who are these rich folks who not only are supposed to be the main beneficiaries of the president's tax reduction plans but are also the group he is counting on to spur the economy to a new burst of non-inflationary growth? At the risk of not doing justice to the great and dazzling variety of our nation's most favored members, we offer a few generalizations to help you decide how the rich are likely to take to their new benefits and responsibilities.
To get yourself qualified as "relatively rich" in 1979 took about $50,000 a year. That put you among the top 5 percent of families in the nation (That's a family with one GS16 or two GS12s). Twenty-five thousand dollars distinguished the top 5 percent of individuals living alone, a group more heavily populated by young and old people.
Are rich people in need of the nation's help? By some obvious measures, they certainly don't seem to be. In terms of straight purchasing power, rich is richer than it was 30 years ago. The top 5 percent of families and individuals still garner about 17 percent of the nation's income, and the purchasing power of that share has grown by over 80 percent, despite rising inflation and taxes.
But in other ways, rich is not so rich anymore. Far less command over the personal services of others is the most obvious loss -- the odds of having even one domestic worker are less than half what they were in the 1940s, and rare is the family with a chauffeur and an upstairs maid. Rich people are also more likely to depend on their jobs, rather than on property income or a family business, for maintenance of their living standard. So they are less easy in their affluence.
Rich people are also much more into debt than they used to be, although as a group their assets have grown still faster. And while their share of the nation's tax burden probably hasn't increased, the magnitude of that responsibility certainly has. The top 5 percent of taxpayers pays slightly more than one-fourth of all federal income receipts. To lighten that burden, many rich people now devote large amounts of their time and money to seeking out ways to avoid taxes. Not just the obvious sheltered investments like oil drilling and real estate, but the more exciting "Mexican fruit rollovers" and diamond dredgings. Because the care and feeding of investments like this can be expensive stuff, these people often find themselves among the "tax-shelter poor," forced to borrow money to pay what's left of their taxes.
Even the people with a million or more in yearly income are reportedly abandoning their heavy commitments to ordinary stocks and bonds to seek out more tax- and inflation-proof opportunities. Despite the best efforts of their accountants, these 2,000 or so taxpayers are forced to yield almost half of their average $2 million a year to the IRS, leaving them to scrape by on a mere million per annum.
How will the president's program affect the favored few? Budget cuts will produce some scattered losses. No more subsidized loans for college costs and fewer high-paying jobs in government and among those private firms that service government's domestic side. Higher air fares will raise the cost of jet-setting, and owners of private planes and yachts will face new fees for airport and Coast Guard services. It is even possible that the drive to reduce government regulations will cut the demand for highly paid corporate lawyers.
For the rich as a group, these losses should be amply compensated by the $20 billion or so reduction in their yearly tax bill, even if inflation erodes much of that gain for the not-so-well-off. How will these people react to their new wealth? Will they, stimulated by patriotic fervor and the prospect of larger returns, earmark their tax cuts for growth-producing investments? Some, no doubt, will be enticed by the new maximum tax on regular investment income to abandon their speculative shelters. This would probably be good for their peace of mind, their neglected families, their regular jobs and the economy as a whole. But most economists agree that if the rich people view the tax cuts as more or less permanent, over time they will spend roughly the same large proportion of them as the not-so-rich would. In other words, the effect of a tax cut on the economy doesn't depend much on whether you cut the taxes of middle-income or rich taxpayers.
One last thought. Are rich people happier than poor people, and will their new benefits make them happier yet?Money, it is regularly observed, isn't everything. But surveys show that, in general, personal happiness increases with money. This will come as no surprise to those who don't have it.