While it is true, as the OWS gang claims, that the “rich” are making more of the income (20%), they are also paying most of the income taxes (38%). Since 1980 the rich’s share of income has doubled, but so have income taxes. Those making at least $114,000 in 2008 (the last complete year from the IRS), earned 45% of the nation’s income, and paid 70% of all taxes. The top 25% of earners, those earning at least $67,200, took in 67% of the income, and paid 86% of the income tax total. The average income tax rate paid by those in the bottom half of the income scale is only 2.6%. Couple those facts with the fact that, in 2010, 47% of households paid no income tax. In fact, some in that group will be getting money from the federal government.
Studies show that the largest portion of the federal income tax burden is paid by a small group of the richest Americans. Payroll taxes of 15% are charged on the first dollar of income earned by a worker, and most of the tax is capped at an income of just below $100,000. The richest 1% pay 27.5% of taxes collected, the top 20% pay 72%, and the bottom 20% pay just 0.4% of taxes collected. One reason that the disparity in tax shares is so large is that Americans in the bottom quintile who have jobs get reimbursed for some or all of their 15% payroll tax through the earned-income tax credit.
One thing the MSM and Democrats love to focus upon is how tax rates have fallen for the “rich.” The latest manifestation comes in the form of the “Buffett Rule.” “[Last year] what I paid was only 17.4% of my taxable income — and that’s actually a lower percentage than what was paid by any of the other 20 people in our office,” wrote Buffett. Obama chimed in, “Middle-class families shouldn’t pay higher taxes than millionaires and billionaires. That’s pretty straightforward.” That is what the MSM reported, but the MSM did not report WHY Buffett paid a lower rate. There are two fundamental reasons. First, Buffett makes a lot of his money from investments, which are taxed at a lower rate than wages. Second, the Social Security tax applies only to the first $106,800 in wages, which means that Buffett and his secretary (assuming he/she makes $106,800) pay the same Social Security tax.
Debbie Wasserman-Schultz, chairman of the DNC, said that we’re at the lowest tax rate since the 1950s. When Wolf Blitzer of CNN (no bastion of conservatism) pointed out to her that the “rich” pay a huge chunk of the federal income tax, Wasserman-Schultz responded, “But they’re still at the lowest tax rate since the 1950s.”
In terms of who pays taxes, there is a big difference between taxes paid and tax rates. Besides, if some of the “rich” want to pay higher taxes in the form of gifts, they are free to do so.
The Deficit and “Tax the Rich”
To partially offset his massive overspending, Obama proposes to raise taxes on the “rich.” His class warfare plan can take him only so far since the rich don’t earn enough to make up the difference for all the spending he plans. The proposed Obama tax hikes, in the next ten years, will take almost $700 billion from taxpayers. That is only 8 percent of the nearly $9 trillion President Obama’s budget adds in debt over that same period. Low tax revenues are not the cause of the debt explosion, spending is. There is no correlation between tax rates and deficits in recent U.S. history. The federal deficit was caused by massive spending increases.
But will it matter? A poll by 60 Minutes/Vanity Fair, conducted from November 29 to December 2, 2010, showed that 61% of Americans polled want to raise taxes for the wealthy as a first step to reducing the deficit
Bush Tax Cuts
The MSM and Obama administration never tire of demonizing the “Bush tax cuts.” They contend that the tax cuts put more of the burden on the backs of the middle class and the poor. But that is simply not true. An analysis of Treasury Department data shows that the “rich” are paying more than they would have paid, not less, after the Bush tax cuts.
And they like to maintain that the “Bush tax cuts” favored the “rich.” In a static world that is true. But the world isn’t static, it’s dynamic. There was more investment, more hiring by businesses, and a stronger stock market. Comparing taxes paid under the old system with those paid after the Bush tax cuts, the rich actually paid a higher proportion of income taxes. The latest IRS data show an increase of more than $100 billion in tax payments from the wealthy by 2005 alone. Why can’t Obama and his economic advisors learn this one fact? But I guess it’s easier to promote “class warfare” by mixing apples and oranges, a static world with a dynamic world.
They also maintain that gains by the rich come at the expense of a declining living standard for the middle class and poor. Again, that is simply not true. The middle class (defined as those between the 40th and the 60th percentiles of income) isn’t falling behind or disappearing, it is actually getting richer. The lower income bound for the middle class has risen by about $12,000 (after inflation) since 1967. The upper income bound for the middle class is now roughly $68,000, $23,000 higher than in 1967. A family in the 60th percentile has 50 percent more real income (buying power) than 30 years ago. And the same thing is happening to the “poor.” Real income levels of the poorest 20% of Americans have actually risen. Economics professor Steve Horwitz explains why this is true.
The rich aren’t paying their fair share, they’re paying their unfair share. But the MSM and the Obama administration ever let facts or the truth get in their way. And have you noticed that they never cite references or analyze data? All they can do is repeatedly play the “class warfare” card.
But that’s just my opinion.