It's ironic that deLong parrots the Reagan Administration's rationale for repealing most of the availability of IRAs, and I know that it so parrots it because Barlett and Steele spend several pages discussing the Reaganite claim to that effect. After quoting at length the conclusions of the Joint Committee on Taxation that deLong apparently finds persuasive, Barlett & Steele respond:
"In other words, the committee said that Congress was doing away with IRAs because they were largely a tax write-off for the affluent.
"Nothing could have been further from the truth. In 1985, 16.2 million individuals and families claimed a deduction for contributions to an IRA. Of that number, 14.5 million--or 90 percent of the total--had incomes below $75,000. A full 71 percent had incomes below $50,000.
"No, the unstated reason Congress canceled IRAs for working persons was to help offset the tax revenue lost by cutting the top rate on the wealthiest from 50 percent to 28 percent. This was, remember, a keystone of Reaganomics.
"But what about those other retirement savings plans, the Keogh account available to professionals--as well as to members of Congress? After all, those, too, were tax writeoffs for retirement--just bigger ones than IRAs. Revised slightly, the Keogh plans remained firmly in place. Once more, IRS statistics tell the story of the two tax systems.
"In 1980, the year before Congress enacted the universal IRA, 2.6 million individuals and families, mostly middle-income workers, contributed $3.4 billion to their IRAs. In contrast, 569,000 individuals and families, mostly upper-income professionals and self-employed persons, contributed $2 billion to Keogh accounts. IRA contributions exceeded Keogh contributions by $1.4 billion.
"Five years later, in 1985, contributions to IRAs, against largely from middle-income Americans, had soared 1,024 percent, from $3.4 billion to $38.2 billion. contributions to Keogh account also had climbed, although not so sharply, rising 160 percent, from $2 billion to $5.2 billion. Now IRA contributions exceeded Keogh contributions by a whopping $33 billion.
"...Consider what happened to different income groups under the two tax laws between 1985 and 1991:
"The number of persons with incomes between $50,000 and $75,000 who claimed an IRA deduction fell 88 percent, dropping from 3 million to 375,000.
"At the other end, the number of persons with incomes between $2000,000 and $5000,000 who contributed to Keogh accounts went up 217 percent, from 27,1000 to 86,000.
"The number of persons with incomes between $40,000 and $50,000 who claimed an IRA deduction fell 78 percent, dropping from 2.6 million to 560,000.
"At the other end, the number of persons with incomes between $500,000 and $1 million who contributed to a Keogh account went up 63 percent, from 8,100 to 13,200.
"The number of persons with incomes between $30,000 and $40,000 who claimed an IRA deduction fell 75 percent, dropping from 3.2 million to 807,2000.
"At the other end, the number of persons with incomes of more than $1 million who contributed to a Keogh account went up 135 percent, from 2,000 to 4,700."
It matters not at all whether one finds these statistics convincing, as deLong's claim was that B&S did not understand the regressivity argument. Clearly, they did, and rejected it. A fair characterization of their argument would have acknowledged this, just as B&S acknowledged the argument that led to Congress reversing course on IRAs and presented it in enough detail to allow a reader to make up his own mind. That deLong instead prefers setting up bogus strawmen to knock down perhaps explains why he's a nonentity at some diploma mill, popping off on an insignificent mailing list about a book he apparently hasn't read, while Barlett and Steele share a Pulitzer and an audience of millions. (Other explanations are also likely.)
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