While we’re not regular listeners to Rush Limbaugh’s radio program, we caught the fact that Limbaugh cited data from our partner organization, the Institute on Taxation and Economic Policy (ITEP), during his monologue the other day. Not surprisingly, Limbaugh both misconstrues ITEP’s analysis and ignores basic economic realities.
Echoing a talking point circulating in conservative media that the tax code has no role in mitigating income inequality (and that somehow immigrants cause it), Limbaugh argued that, therefore, higher taxes on the rich cannot reduce income equality. He said this is proven by simply making “a quick comparison of state inequality data and their corresponding tax codes.” He went on to assert that because California and New York have two of the most progressive tax systems but also some of the highest levels of income inequality, this means progressive taxes do nothing to reduce income inequality.
Honestly, it’s hard to know where to even start with breaking down this nonsense.
For one, Limbaugh must have overlooked the central conclusion of ITEP’s Who Pays report, which is that ALL state tax systems are regressive, meaning that even the most “progressive” state tax systems in the US still exacerbate income equality. Even in California, which Limbaugh claims has one of the most progressive tax systems (it doesn’t), 10.2 percent of family income for those in the bottom 20 percent is spent on state taxes, whereas only 9.8 percent of the top 1 percent’s income goes toward state taxes.
Another critical problem with Limbaugh’s monologue is that he did not actually do much analyzing, but instead opted to cherry-pick New York and California off the list of states with high levels of income inequality. By doing this, Limbaugh ignores the fact that Arizona and Texas have two of the most regressive tax systems and – what? – also happen to top of the income inequality list. To actually support his point, Limbaugh would have had to compare the relative progressivity of different tax systems with their level of income inequality, an impossible task considering that ITEP does not actually rank the states according to progressivity. In addition, Limbaugh does not even consider the myriad of factors (besides immigration) that contribute to income inequality, such as government safety net and income supports, the types of jobs available and their wage levels, or the presence of industries, like finance, that generate unusually high wealth.
One last fatal flaw is that Limbaugh utterly ignores the reality that progressive taxes straightforwardly take more money from the wealthy and redistribute that money more evenly to the population through government services, which, for obvious reasons, affects income inequality. The fact is that basic economic logic and decades of economic analysis have shown that lower taxes on the rich directly increase income inequality. As a definitive study by the non-partisan and widely respected Congressional Research Service (CRS) puts it, “lowering top marginal tax rates has the effect of further increasing the disproportionate amount of income earned by the wealthiest of the wealthy.” Similarly, the OECD’s economic analysis of the US earlier this year found that our failure to implement a more progressive federal tax code was a critical factor in making the US the fourth most unequal country in the developed world and that this must be reversed in order to stave off even high income inequality.
Next time Rush Limbaugh wants to use ITEP numbers, he should check with us first – we’d be happy to enlighten him!