Do the rich pay their fair share?

Last week, Georgetown law professor Peter Edelman wrote about poverty in America in the New York Times. Edelman spent most of his time outlining what he sees as the causes of poverty in America, but he did offer some basic liberal fare when it came to solutions:

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We know what we need to do — make the rich pay their fair share of running the country, raise the minimum wage, provide health care and a decent safety net, and the like. But realistically, the immediate challenge is keeping what we have. Representative Paul Ryan and his ideological peers would slash everything from Social Security to Medicare and on through the list, and would hand out more tax breaks to the people at the top. Robin Hood would turn over in his grave.

Edelman’s ideas are, of course, philosophically laughable to readers of this site – for example, the wealthy already pay a higher average tax rate than everyone else. Unfortunately, they are popular within certain segments of Congress, the media, higher education, etc. Their appeals to emotions (“Robin Hood would turn over in his grave”) often make conservatives look cold and heartless. So how do we turn the tables, especially when it comes to taxes? Simply put, we break down the math of taxes into the most easily understood manner possible – direct comparisons.

Normally this would be an arduous endeavor, but a numbers breakdown comparing income to federal taxes paid just came out this week from Just Facts, based upon a Congressional Budget Office report in July that analyzes the 2009 effective federal tax rates of households. Here is the relevant Just Facts chart:

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To break it all down even more simply, consider the following, based upon two tables at the link above:

  1. In 2009, the top 20% of earners brought in an income about 10 times that of the bottom 20% of earners. However, they paid about 221 times as much in taxes.
  2. Breaking down the top one percent of earners is even worse for the liberal argument. To wit: The top one percent of earners made about 50 times as much money as the bottom quintile in 2009, but paid about 1,500 times as much in taxes.

Let me repeat this: in 2009 the top one percent paid about 1,500 times as much in taxes as the average in the bottom twenty percent. So now the question arises: what is the fair share the wealthy should pay? Is 40% of their income going to the federal government enough? How about half? Does it matter that the 50% or so of Americans who pay little or no non-retirement income taxes basically get a free ride when it comes to federal roads, immigration control, etc. – on the backs of the wealthy?

While almost all Americans do pay some sort of federal taxes…the 50% or so of taxpayers who don’t pay non-payroll income taxes benefit from federally-funded roads, education services, immigration control, the military and other federal services. Who, then, pays for these services? According to the Tax Foundation in an October 2011 report, “The top 5 percent earned 31.7 percent of the nation’s adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes.” In short, most taxes for non-retirement social spending – the same social spending liberals are so keen on expanding – are being paid by those people liberals also say don’t pay enough in taxes – the top five percent.

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The nation desperately needs tax reform, both to jump-start the economy and begin the process of expanding the tax base. However, targeting the rich simply isn’t going to do enough – as the Joint Economic Committee pointed out, even the much-ballyhooed Buffett Rule would only bring in about $47 billion over ten years. Liberals can wish the rich aren’t paying enough taxes all they want to, but it’s simply not true. And until they they start pushing solutions that include the elimination of loopholes and lowering rates, we’ll know they aren’t serious about increasing fairness, reducing deficits, or getting the economy back on track.

 

 

 

 

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