My problem with stats like “the top x% of all taxpayers paid y% of all taxes is this…”
First off, these figures don’t tell what percentage of all income is made by the top x% of taxpayers. Consider this…the combined wealth of the 400 wealthiest Americans (and remember, there are 300 million people in this country), is equal to the combined wealth of 1/2 of the entire country. In the year 2000, the richest 1% of people worldwide held 40% of all the world’s assets, and the richest 10% held 85% of all the world’s assets. Conversely, the bottom 50% of the world controls 1% of the world’s assets. The top 1% of wage earners make more than the bottom 40%.
Saying that they paid 53.8% of income taxes but reported only 30.6% of all income is also not persuasive to me for a number of reasons. First, because it’s all about what is “reported as income”. Capital gains are not treated like regular income, and the top 1% controlled 42% of all stock and the top 10% controlled 82% of all stock in 1997. There are many carry forwards, write offs, tax shelters and other ways to shield one’s money from taxation and reporting as income that are not available unless you have a lot of money.
MOST importantly however, this does not account for anything but individual income taxes. Take the following example:
Joe makes 10,000 per year. John makes 10,000,000 per year. Joe pays $500 per year in personal income taxes, or 5%. John pays $2,500,000 in personal income taxes or 25%. No one feels sorry for John, he still takes home 7.5 million a year, but he does pay 5 times as much of his income in personal taxes on a relative basis to Joe. But Joe and John both pay property taxes…Joe pays a few hundred bucks a year via his rent, John pays a few thousand. Joe and John both however pay 42 cents a gallon in taxes on fuel…Joe drives fewer miles than John because all he can do is get back and forth to work, while John can travel, but they are paying the same rate. Joe and John both have to pay taxes on various licenses, to drive, to do this and that, etc. Joe and John both pay 7% on everything they buy in stores in sales taxes. John may buy more things so he pays a bit more in taxes on a dollar per dollar basis, but they both pay the same percentage. There are local, state, county and municipal taxes and fees EVERYWHERE around us. And at the end of the day, Joe has spent $4,000 a year of the $10,000 he made paying all those taxes. John makes 1,000 times what Joe makes, but it’s not like he buys 1,000 times as much gas, 1,000 times as many things in the store, etc, or 1,000 times as much in property taxes, car licenses, etc. It’s more, but it’s not 1,000 times more…these things are NOT RELATIVE. So, John maybe spends $500,000 a year on all these taxes, where as Joe spent $3,500. John is now paying $3M on $10M in income, or 30% overall. Joe is paying $4k on $10k, or 40% overall. This type of stat about the rich paying “more than their fair share of taxes” is all a smokescreen.
What happens is, we have this so-called progressive tax structure. But the trickle down Republicans say that it’s not fair that I’m paying 35% of my income while others are paying 10% of theirs. Well, to be fair, they’re paying 35% on every dollar they make over and above a certain threshold. And the more they make, the more opportunities they have to shield it.
If these people who point out the progressive tax structure, and then only show you the side of the equation which shows how much of the tax burden these unfortunate rich people have to bear, were REALLY interested in equity, here’s what they would want.
They would want a tax structure which says, the first $x are excluded from taxation, period. I personally would set that number about 10% above the poverty line, and make that # the minimum wage based on 40 hours a week, because I don’t think anyone willing and able to work full time should have to do so for less than a living wage, but that’s another argument that this invariably leads to, so let’s leave that aside for now. Then, they would say, let’s collect ALL taxes at one level, and distribute them to the states, counties and municipalities based on population. That whole trickle down theory seems to work when they are giving out tax breaks, but when it comes to collection, then NO SIR, that’s a state’s rights issue. We need “smaller” government.
But if you start to cut those top rates, you bring in less money and you have less money for aid to smaller governments. These governments then have to pass taxes along to their citizens and they do so in ways that are not progressive, but are REGRESSIVE like gas taxes, permits/fees, sales taxes, etc. And what happens is ultimately the less you make the larger the percentage that is actually spent on taxes.
A flat tax is an OK concept, but not if you aren’t willing to abolish every other tax, because if you kept all the local taxes and state taxes where they were and implemented a flat tax, the poor would pay an even HIGHER percentage of their income in taxes than do the rich. Essentially, people who want to cut the taxes for the wealthy often obscure the fact that their actual marginal tax rate when all taxes are considered is not equitable. And whereas someone who makes minimum wage can’t even afford to live outside of poverty and STILL is subject to taxes they simply can’t afford, hiking the taxes of someone who is worth more money than he will ever be able to spend in 100 lifetimes is just not all that painful.
So, yes..let’s have a completely flat tax, but exempt the first say $20k of income per person. That income is essential to survive, everything else is extra. Every dollar beyond that is taxed at whatever percentage is necessary to run our country and provide the things to people they can’t provide for themselves (infrastructure, education, etc.). Only disposable income is taxed and all disposable income is taxed equally. But no one who thinks the rich are paying too much in taxes would go for that, because they just want to make the Individual Income Tax equal, and ignore the rest.
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