Myth – The Rich Don’t Pay Their Fair Share
Perhaps one of the most common myths (or lies, depending on how you look at at it), is the idea the “rich don’t pay their fair share”. But is this true? Various groups drag out “studies” to prove their point, but are they correct? Instead of using biased “studies” (from any group), why not simply go to the source? The Federal Government published a CBO Paper in August 2004 titled Effective Federal Tax Rates Under Current Law, 2001-2014. On Table 2 (page 18 of the PDF) “Effective Federal Tax Rates” under “Share of Total Federal Tax Liabilities” heading shows some interesting results.
Taxes paid by highest incomes
- The top 1% pay 22.7% of taxes.
- The top 10% pay 50% of taxes.
- The top 20% pay 65.3% of taxes.
- The top 40% pay 84.3% of taxes.
Taxes paid by lowest incomes
- The bottom 20% pay 1.1% of taxes.
- The bottom 40% pay 6.1% of taxes.
The bottom 40% pay about 6% of taxes, while the top 40% pay about 85% of taxes — or about 14 times more than their counterparts in the lower brackets. But in light of the constant droning “the rich don’t pay their fair share”, how many expected the distribution reported in the CBO paper? Be honest.
Progressive taxation is not inherently wrong, but taken too far it’s socialist income redistribution, which is legalized theft. Asking one minority group to shoulder the burden almost exclusively is discrimination and unethical. Those blessed financially have an obligation to help others, but when the top 40% pay almost all the taxes, isn’t that enough?
Charity is a foundational principle, and those blessed financially should help those less fortunate. Everyone should pick a favorite charity and contribute to it regularly. Note: if you do plan on beginning charitable donations, be vary careful, some “charities” use the majority of funds (well over half) for administration. Do some research about your chosen organization and be sure your donations are being used for what you intended. As a very general rule, if administration and fundrasing are more that 10-15%, we’d question that organization carefully and thoroughly before sending money.
Do the rich pay enough in taxes?
Everyone has a stake in needs and functions of government, so everyone should pay. Once you’ve removed huge sections of people from paying anything, what incentive do they have to demand controlled spending? None. After that, they’ll always vote for the candidate who gives them the most handouts — after all, they’re not paying for it. Consider the following comment about democracy:
It can only exist until the voters discover that they can vote themselves largess of the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. (This quote has been attributed to both Sir Alex Fraser Tytler and Alexis de Tocqueville.)
So for those who believe the rich don’t pay their “fair share”, how much is enough? If you designed the tax system, who would pay what? With the top 40% shouldering 85% of the burden, how much more would you ask them to pay? And how many in the lower brackets would you exempt? Or do those claiming the rich don’t pay enough really want socialist income redistribution? We’d really like to know.
antifolkhero said
This is an interesting article. Family members of mine are in higher tax brackets, pay much more in taxes and yet still vote democratic. Having recently applied to law schools, I was appalled to find special treatment, from acceptances despite poor grades to full-ride scholarships, given to people simply because of their ethnic background. Does being from a non-white race make you automatically poor and opressed? I beg to differ. Multiculturalism has become a shield for everyone except caucasian people, who are always the bad guys.
Marvin McConoughey said
It is difficult to know how much tax burden is truly borne by the rich. Consider, for example, if a firm wishes to obtain a new CEO. If the potential CEO demands a half-million a year income after taxes, the firm then does a simple math calculation and provides the salary that will provide the desired after tax income. If tax rates rise, so does salary. Someone is paying the taxes but it might well be the customers, other workers, or even internal programs such as research and development. The taxes get shifted in a way that may not be definable. Yet, on paper the CEO pays the income taxes. That is true in terms of the paper trail but the real economic reality goes undocumented. I use the word “rich” loosely. In the context of average global population income per person, most Americans are rich.
cold logic said
It’s a bit misleading to use “the top 40%” to mean “the rich”. The top 40% are households that filed $26k or more.
Constitutional Conservative said
That’s the problem – when politicians say “the rich”, who are they referring to? I’ve seen them call the “rich” as low as people making $30,000/year. Generally, I’d put the category somewhere in the $150,0000-$250,000 range, but that’s debatable. But of course it also depends on where you live. $100k in New York is certainly different from $100k in Idaho.
The point is by any reasonable scale, the rich pay the vast majority of taxes. In this context, the top 10-20% are “rich” and pay half to two-thirds the taxes.
Joe said
Great. Now where are the numbers about income distribution? How much of the country’s wealth do these 1 percenter greedheads own? I call them greedheads because that’s what they are. They spend all day thinking about money, as opposed to your average school teacher or social worker.
Constitutional Conservative said
It’s amazing you know the motivation of everyone and what they think about. Don’t you think you’re jumping to conclusions here – just a bit?
But to your question, let’s suppose the 1 percent of the top taxpayers have about 60% of the money (just a guess). Are you saying they shouldn’t have it? Are you for income redistribution? Or that hard work should not be rewarded? If they don’t pay enough right now, how much more would you have them pay?
Let’s be specific – what would YOU do? Most people are shocked when they learn the rich pay most of the taxes (as they never hear the truth about who pays the most), so if you think it’s not enough, how much should be paid and by whom?
Little Sue said
As a member of the working class, I’d like offer all billionaires the opportunity to exchange jobs and bank accounts if they feel they are unfairly taxed and missing out on the free ride that the rest of us enjoy. I can’t promise you will qualify for the earned income tax credit; nonetheless, you can experience the warm feeling I get after making others rich through the work I do and the bills I pay. After the switchover, I can cover your share of the Federal Government’s expenses just like you currently do for me. Your assets will then be protected by the US government through military power, occasional bailouts, and countless other avenues for free. Well, maybe not your assets. I don’t really have any. But your way of life will be protected. Guest workers will probably keep your wages in check so don’t worry about jumpin’ into a higher tax bracket. Inflation is really nothing to worry about either; dollar stores can be found on every corner these days. So, hey, I recognize my freeloader status and I am ready to become a more responsible tax-paying citizen. I’ll assume the burden that comes with being filthy rich; you know, paying for this great country and everything. I wouldn’t expect you to do that. Ya can’t get blood out of a turnip. I mean, like, I can’t control sales taxes or real-estate taxes or gas taxes or tollbooth fees or whatever; nonetheless, I’ll go the extra mile and promise not to make you pay for political influence.
Josh said
What they conveniently leave out is what percentage of the wealth each bracket controls. The top 10% control 69.8% of the wealth in the country. According to this article’s numbers, they pay 72.7% of the taxes.
lisa laati said
You are the one that is not publishing the facts. It doesn’t matter what percentage of taxes one pays. What does matter is the percentage of one’s income one pays. In other words…why should I pay 28% to taxes of my check when millionairs and billionairs pay 15%. If I pay 28% then they should pay 28%. That is what is fair. Anyone who negates the logic of that and refuses to acknowlege the truth of that statement is just not wanting to accept the truth. It’s THAT simple.
akaka said
Josh and Lisa, it is not like things like facts are important on a blog called “constitutionalconservative”
Constitutional Conservative said
So by your account (assuming it’s possible to determine who controls the “wealth”), the rich overpay proportionally to their wealth. In other words, the system is *too* progressive and the rich should pay less. Somehow that’s not what you were trying to prove, me thinks.
It’s the CBO report on who pays the income tax – is it incorrect? If their report has errors, please let us know. Otherwise, it’s fact from the people who would know.
The tax rate on millionaires and billionaires is over 28% — 35%.
If you’re complaining about deductions, exemptions and such, would you support a flat-tax where *everyone* pays, say 10%? No deductions, no welfare disguised as tax credits. Everyone has a stake in government, everyone pays for it.
A flat-tax with no deductions; something with perhaps two or three brackets – *everyone* pays at least 5%, then a middle bracket of 10%-13%, and a top bracket of 17-19%. No deductions, no credits. Everyone pays.
Would that be fairer in your view?
Please study the government’s CBO report and cite factual errors. The facts are what they are — the top 40% pay almost all federal taxes (in spite of the constant drumming “the rich don’t pay their fair share”). Are you claiming the CBO report is in error? If so, please provide your sources with proof. You know, facts.
Or is it your opinion the top 40% should pay *more* in taxes? Or the top 10% should pay all the tax, and everyone else pay none? Since the rich already pay almost all the income tax (a fact from the CBO report), what changes would you make to the system?
Read the CBO report – it’s quite detailed and filled with information.
It’s interesting all these comments don’t dispute the basic premise – the rich already pay the majority of income tax; none of these comments offer any proof the government report is inaccurate (perhaps because the reality of the rich paying the most conflicts with their ideology).
If the report is in error, please let us know. Otherwise, the report is quite clear the rich pay most of the income taxes. That may not be a popular fact for some, but absent proof of errors in the report simply complaining or saying it isn’t so doesn’t advance the discussion much.
The question is simple — since the rich pay most of the income tax already, when cries of “soak the rich” are heard, what changes would you make in the system? The top 40% pay most of the tax already (while the bottom pays virtually nothing), how much more would you have them pay? 95%, 98%, 100%? And on the flip side, would you exempt others from paying anything? If everyone has a stake in government, shouldn’t all pay for it?
That’s the question. If you’re not going to offer evidence the report is wrong, at least be constructive and discuss what changes *you* would make instead of complaining you don’t like the facts (or they’re wrong).
For future commenters, you’re not advancing the discussion much by complaining you don’t like the facts of the report without offering any evidence to support the claim the report is factually wrong. So here’s some ideas which *would* advance the discussion:
* Since the rich pay almost all the tax, they should still pay *more*. That’s fair.
* Tax rates should be cut to create more incentive for business.
* It’s a good time to raise/cut taxes because …
* It’s a bad time to raise/cut taxes because …
* Income redistribution is a fair method to spread the wealth around.
* The tax rates should be increased, to pay for more programs. The rich pay almost all the tax, but they can pay more $$$.
* The poor should pay more/less percentage and/or $$$.
* The rich should pay more/less percentage and/or $$$.
* It’s not the tax rates, it’s tax loopholes – eliminate deductions.
* A flat tax is the best tax-reform.
* A national sales tax is fair.
* It’s fair for everyone to pay as everyone to has a stake in government.
* It’s fair for some to pay nothing, and others to pay for everything, as they have more.
And so on. Lots to talk about. What are your ideas? How should taxation be handled? But please, unless you can prove errors in the report, it should be a settled issue – according to the government who collects it, the rich pay the vast majority of income tax.
Pobre Cita said
The fact that there are extremely wealthy people with multiple mansions, yachts, and cars while there are people struggling to make a house payment is a bit disgusting. Not all of their wealth is hard-earnd. Some are singers or actors who made a lucky break and get to spend their lives playing around on stage, some are just born into it, like Trump’s kids. I don’t see why we can’t all just pay a fixed percentage of our income; that way everyone would feel an equal pinch.
Amen to what Little Sue said.
Thunar said
Hold on – the top 10% own 90% of the wealth, so they should be paying 90% of the taxes, even if we had flat taxes.
The bottom 50% own less than 3% of the wealth, so they should be paying 3% of the taxes.
There are plenty of taxes besides the income tax.
Anyway the real losers in our current tax system are skilled professionals, those making say between $140 and half a million per year.
Here’s a real interesting question – why should labor be taxed at all? When I work for an hour, I am really producing say $50 worth of wealth but only making $40 in compensation. Also I have lost an hour of my life, that I can never buy back. Labor is really an even exchange.
So it’s mystifying – If my money works instead of me, I only pay taxes on profits; if I am directly involved in productive work – whether that’s writing computer software or picking up garbage or picking plums – I’m taxed on my entire revenue. A company that makes $1M in revenue and of that $100k is profit, is only taxed on the profit. But a skilled Surgeon who makes $200k but spends $80k on transport, food, house, clothes, continuing education, etc. pays taxes on the whole $200k – not $120k.
Constitutional Conservative said
You’ve confused wealth (actually, net worth) with income.
If you’re really talking about taxes on net worth (like the death tax), how much should it be? Should Bill Gates pay 90% of his net worth every year? Of course, a person’s net worth has already been taxed (by income tax, capital gains tax, etc), so that’s double taxation, if you’re for that.
By your plan, if someone makes $3 million per year, but spends it all (leaving no net worth), zero tax liability! That’s probably not what you had in mind.
Perhaps the best way to be fair is a sales tax, and repeal all income, death, capital gains and other taxes. Then you’re only taxed when you spend money, not invest or save. Exempt food and medicine and you’ve got a fair system where everyone pays (but that assumes Congress would never impose other taxes again, and we know how trustworthy they are, so it’s a DOA idea).
The rest of your comment is equally wrong. A surgeon is a business just like any other, and deducts expenses, so if he makes $200k, he’ll deduct eduction, travel, and other legally deductible expenses (just like any other business) before paying taxes on what’s left. If the surgeon works for a hospital or other business instead of himself, his employer will pay required travel, education and other expenses. In neither situation will the surgeon pay taxes on his expenses.
And you’re also forgetting if you invest (make money work instead of you), you’ve already paid some sort of tax on it (income, capital gains, inheritance, etc), so unless you’re advocating taxing the same money multiple times, in makes sense to only tax the increase, since the initial investment has already been taxed.
Marvinlee said
If we accept that some rich people have earned great income, and that some have not, then perhaps we could accept that some poor people are poor through no fault of their own and that some are poor for self-inflicted reasons. A moral element of rightness enters here. It is right for a society to motivate people to create, to innovate, to invent, to take business risks. The reason is not altruism but societal self-interest. It is questionable to relieve the self-inflicted poor of all their poverty because to do so is to also weaken the incentive to self-manage one’s own life.