U.S. Tax Policy Must Regress
In a short, direct article Scott Hodge debunks one of the radical left’s essential talking points, namely that the American rich don’t pay enough taxes to support their poorer countrymen. On the contrary, the U.S. system is more liberal than any other country in the Organization for Economic Co-operation and Development (OECD):
Indeed, the IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act.
Remarkably, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined.
Hodge’s conclusion needs no further comment:
We are definitely overdue for some honesty in the debate over the progressivity of the nation’s tax burden before lawmakers enact any new taxes to pay for expanded health care.
An honest debate would be great. But the truth is, there’s nothing else to say.
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In a short, direct article Scott Hodge debunks one of the radical left’s essential talking points, namely that the American rich don’t pay enough taxes to support their poorer countrymen. On the contrary, the U.S. system is more liberal than any other country in the Organization for Economic Co-operation and Development (OECD):
True that, and the debate would only be that the top 1% need to have their taxes raised. 1954 was a good example of that.
And naturally – the lower income masses – the ones that typically do not create jobs – outvote the 1%.
“There’s nothing else to say.”
Sorry, but this graph only tells half the story. Last I checked (I haven’t looked at the latest numbers yet), the percent of taxes paid by the rich, as a percentage of their income, was decreasing, even if the percent compared to the total amount paid increases. How can that be? It’s because the income gap increases. We would have to take that into consideration to know the whole story, and to compare the US to other nations.
I’ve now had a chance to look at the updated data:
Since 1987, the income of the top 1% has grown by about 5 1/2 times. While the income of the bottom 95% has grown by about 2 1/2 times. That means even if tax rates had remained constant throughout that time, you would still see the top 1% paying more of the share of total taxes, due to their earning more of their share of the income.
But, tax rates have not actually been constant. They have actually been getting lower for the rich (from 26% in 1987 to 22% in 2007). Taxes, as a percentage of income, have been getting lower for the population as a whole (from just over 13% to just under 13%), but that means that the tax rate has been falling faster for the richest 1% than for the population as a whole. So the rich aren’t paying more of the share of total taxes *because* of the tax code–they are doing so *in spite of* the tax code, because of the rising income gap.
Now, I’m actually not arguing that the rich aren’t paying “their fair share”. That is a completely subjective argument that no graph can prove or disprove. I’m actually mostly conservative and can’t stand the rich being made the whipping boy as they have been lately. However, I am conservative in more ways than one. I am also conservative which respect to jumping to conclusions based on pretty graphs put out by biased sources. The one thing I hate more than faulty arguments from the other side is faulty arguments from my own side.