The only rational way to look at this whole tax debate is to look at all the taxes paid by different income groups: federal taxes, state taxes, sales taxes, property taxes and local taxes.
Even though the latest rage is to raise taxes on people making over $250,000 (California just voted to increase state taxes on this income group to 15%), let’s put all the hoopla aside and look square at the numbers.
Of course, 47 percent of American’s don’t pay taxes. They do pay state and local and sales taxes, just no federal taxes. Actually, the minimum tax rate for the lowest wage earners is, according to this chart, roughly 15%. It’s just as unfair to say Romney only paid 14% in taxes. Bundling all his taxes together, he paid closer to 30%, which is the national average.
What about the notion that the wealthiest one percent pay the lion’s share of taxes? The truth is that middle income folks pay an average of 50% all things considered. It’s pretty consistently 50% for every state in the nation. There are 138 million taxpayers total and roughly 125 million are “middle income” types.
Now look at a Washington Post chart of the total taxes paid by every income group. It’s pretty consistent above the lower 20%. There’s also a chart of the total taxes paid by each income group. That’s even more consistent. The wealthy pay about the same share of total (federal, state and local) taxes as all the other taxpayers.
So, technically, the wealthiest Americans pay the same share as everybody else above the poverty level. So you can’t very well claim that they don’t pay their fair share.
Now, the whole debate is the definition of “fair share.” Mathematically, the wealthy pay the same total share of their income as everybody else. You have to rephrase the debate to, “Should the wealthy pay a higher percentage of their income than everybody else?” in order to put the debate in its proper place.
I know that doesn’t sound so good, but it’s the real issue here.
Is the whole debate worth it? Will a tax on the wealthy balance the federal government? The most optimistic estimates are that a 6% surtax on those making over $250,000 would raise about $50 billion a year. That’s a lot of money, but only a drop in the bucket compared to our annual $1.5 trillion deficit.
So, it’s wrong for the Democrats to make everybody think that a millionaires tax will solve all our tax problems. It won’t even cover the increased cost of Obamacare, much less our whole deficit.
You also have to balance this argument against the proven fact that these high wage earners are often small business owners who declare their profits on their personal income taxes. If they have to pay 6% more in taxes, will they still hire people?
Obamacare already levies a basket of taxes totalling least that amount. If we raise their federal taxes by 6% will there be any net gain to the government at all? What’s to keep these people from declaring their taxes as a business and spending an extra 5% on an accountant? Or giving 10% to charity and paying the same federal tax rate?
What about all the other states that are going broke? They’ll want to raise taxes on the weathy next year to balance their budgets. The state tax for high wage earners in California is 15% now – rich people there now pay almost 65% of their income in taxes. How long before they just move to another country and bring their businesses with them?
All things considered, it’s childish to focus this entire debate on raising taxes on the wealthy. It’s a great rhetorical statement, one that has resonated with people since Jesus attacked the money lenders on the front steps of the Temple.
In this context, however, it’s almost irrelevant. Whether or not you do it, the federal government will still be flat broke.
If anything, the conservatives have history on their side. It’s economic heresy to raise taxes on anybody during a recession.
I have no doubt that the wealthy would pay more taxes IF AND ONLY IF all that extra revenue went directly to paying down the debt AND if there was a guarantee that the federal government would balance the budget and not use any tricks to take that money from the rich folks’ surcharge tax and dump it into the general revenue fund (like Washington did with $2.5 trillion of our money from the Social Security Trust Fund).
That should sound like good news to every taxpayer. Our middle class taxes don’t go up, and the federal government is on a steady trend toward solvency. A healthy federal government equals a healthy economy, more jobs and prosperity for all.
I’m quite sure the Republicans in the House would sign off on a deal like this immediately. The wealthy would be happy, even motivated. They love America. They want it to be all it can be. Paying down the debt is the best thing anybody could do. Any homeowner knows the need to pay off the mortgage and how invigorating it is to get all the credit card bills paid off.
Democrats thrive on deficit spending, however. Obamacare is a budget monster. Keeping all of Obama’s promises to illegals and minorities, providing free health care to 20 million poor people, hiring 100,000 new teachers – and on and on – that takes hard cash.
With an annual budget already $1.5 trillion in the red, balancing the budget is not something they want to do.
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