Are the Rich Paying Their Fair Share?

Are the Rich Paying Their Fair Share?

– By Howard Sierer –

“Make the rich pay their fair share.” This all-too-familiar refrain is trotted out whenever free-spending Democrats want to pretend to be doing something about the ballooning federal budget deficits they’ve created.

Thanks in part to new spending programs added in Pres. Biden’s first two years, the Congressional Budget Office projects a 2023 budget deficit of $1.4 trillion (yes, trillion), the highest by far in a non-recession, non-COVID year. Even worse, the Congressional Budget Office forecasts $2 trillion deficits annually for the next 10 years.

Doubling everyone’s income taxes would just cover these deficits: Are you in favor of that? Raising taxes across the board by even a modest fraction of that amount would send many incumbents home after the next election, and those now in office know it.

Democrats instead pretend that “soaking the rich” will solve the problem. It can’t. For example, to cover the CBO’s expected $2 trillion annual deficits, the federal government would need to confiscate all of the income – every dime – earned by the 917,000 taxpayers with incomes over $1 million. Alternatively, they could take 76% of the earnings of the 2,753,000 American families earning over $500,000 per year, another non-starter.

As these figures show, Congress has committed to spend far more than American families can possibly pay without drastic changes in our lifestyles.

Using income tax facts provided by Congress’ Joint Committee on Taxation, take a look at who’s paying how much today:

The 43% of all taxpayers earning $50,000 or less will earn about 10% of taxpayers’ aggregate income yet owe a negative 4.8% of income taxes. This number is negative because benefits such as the Earned Income Credit (for the working poor) and the Child Tax Credit are paid with checks from the IRS rather than another federal agency.

The next 27% of all taxpayers have incomes between $50,000 and $100,000. They will earn about 19% of all taxpayers’ income and pay about 6.3% of all income taxes.

The next 28% of all taxpayers will earn between $100,000 and $500,000; they will have nearly half of the aggregate income and pay 47% of all income taxes.

The 1.5% of taxpayers with incomes over $500,000 earn 22.7% of the nation’s aggregate income and pay about 51.8% of all income taxes.

Take a look at another way of measuring our tax burdens:

All of us pay taxes in addition to federal income taxes, most notably the Social Security and Medicare taxes deducted from our paychecks. We see sales taxes added to our purchases and pay other taxes indirectly such as property taxes buried in rent and corporate income taxes buried in the products we buy.

The Tax Foundation prepared a comprehensive study of the effect of taxes of all kinds imposed by all levels of government – federal, state and local – and all the government benefits returned to individuals including income transfers like Medicaid and food stamps. The study showed that the bottom 20% of income earners received an additional $1.27 in benefits for every dollar they earned, a 127% bonus.

Those in the second 20% received $0.31 in benefits in addition to every dollar they earned. Those in the middle 20% paid $0.02 more in taxes than benefits they received for every dollar they earned while those in the fourth 20% paid $0.159 more in taxes than benefits received. As you might expect, the top 20% received far fewer benefits and paid $0.31 in various taxes out of every dollar earned.

I support a progressive tax system and no matter how we arrange the numbers, they show that the U.S. tax system is highly progressive: Those with higher incomes not only pay more tax but they pay a progressively higher percentage of their earnings as taxes.

So is our current tax burden distributed fairly? Your view likely depends on where your household sits on the income scale. Most of us feel we’re paying our share or, more often, that we’re paying too much.

As for me, I think we’ve got a government spending problem, not a taxation problem. The federal government expects to collect $4.9 trillion from all sources this year. We need to hold our elected officials accountable for directing this enormous sum to programs with the most “bang for the buck,” and to be willing to cut back or eliminate those with a lesser payoff. That’s how households make spending decisions; our federal government should do the same.

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