The Rich Pay More In Taxes Because They Can
ThinkProgress' Pat Garofalo notes that congressional Republicans are trotting out the talking point that "the top 1 percent already pays 40 percent of the taxes in America," as though the super-rich are unfairly burdened with onerous tax bills. As Garofalo explains, that's false:
While the richest one percent of Americans do pay about 40 percent of the total federal income taxes paid in the country, that's a far cry from 40 percent of overall taxes. Even those working Americans who don't make enough money to have federal income tax liability pay federal payroll and excise taxes, which fall much harder on the middle-class and low-income individuals than those at the upper end of the income scale.
Once all taxes are taken into account, according to the Congressional Budget Office, the richest one percent of Americans pay about 28 percent of total federal taxes, which is right in line with their 25 percent share of total income. And therein lies the real story: the richest one percent of Americans pay such a large share of federal income taxes because they make such a large share of the overall income.
But the talking point isn't just technically false — it's deeply misleading as well. Take a look at this post by National Review's Veronique de Rugy to see why:
Income Tax Burdens in Perspective
As you can see, the top-earning 1 percent of Americans (the 1.4 million returns making more than $380,000) paid 38 percent of federal personal income taxes while the Americans in the lower half of the income spectrum (or 70.0 million returns) paid 2.7 percent of the total. This chart also shows that roughly half of taxpayers pay for almost all of federal personal income taxes.
Based on this data, it is hard to say that top income earners are taxed unfairly lightly.
The key word here isn't "unfairly" or "lightly": it's "burden." For the wealthiest Americans, income taxes simply aren't a burden in any reasonable sense.
To get a sense of just how true that is, we should look at wealth, not merely income. The richest one percent of Americans earns about 25 percent of total annual income — but that actually understates the gap between the super-rich and the rest of the country. The richest one percent owns as much financial wealth as the bottom 95 percent of Americans — 40 percent of all the wealth in America. Four hundred Americans — the richest 0.0001 percent of the country — have as much wealth as the bottom half of the country combined.
That's a mind-bogglingly large amount of wealth, concentrated in very few bank accounts — about $3 billion per member of the Forbes 400. There's only so much you can do with that much money — only so many houses you can buy, only so many boats you can ski behind, only so many libraries you can underwrite to get your kid into college. It simply isn't a "burden" for the ultra-wealthy, or even the garden-variety rich, to pay slightly higher taxes. And it's obviously far less of a "burden" for someone making $500,000 a year to pay five percent more in taxes than for someone making $30,000 a year to do so, for precisely the same reason that food stamps are more efficient stimulus than tax cuts for the wealthy: The more money you have, the less important each incremental dollar is.
"Fairness" is a subjective concept, of course, and House Republicans and National Review writers clearly have a different approach to it than do advocates of progressive taxation. But there are certain practical considerations that aren't subjective. For example: If we're going to have Medicare and Social Security and a strong military and roads and bridges and public education, we have to pay for them. And the people who can afford to pay for them are the people who have the money.
Former President George W. Bush used to say he believed "as a matter of principle, that no one in America should pay more than one-third of his or her income to the federal government." But that isn't really a "matter of principle" — what makes 33 percent the 'principled' cutoff? Why not 34 percent or 32 percent or 38 percent or 28 percent? Bush never explained, because there wasn't anything special about 33 percent, except that he (or Karl Rove) thought it sounded good.
Bush's phony "matter of principle" was designed to do the same thing the current talking point about the richest one percent paying 40 percent of taxes is designed to do: con people with abstractions rather than focusing on concrete questions, like whether or not America should provide health care for the elderly, and if so, who has the money to pay for it.
The good news is that the American people, including the wealthy, understand that higher taxes on the rich aren't much of a "burden": Two-thirds of Americans support tax increases on the rich, and evidence suggests that the rich don't flee higher taxes. And that's true even though Americans greatly underestimate the extent to which wealth is concentrated in the hands of a very few rich people.