Friday, July 31, 2009

Tax Fairness? Top 1% Pays More Than Bottom 95% of Taxpayers

The left's mantra is that the rich need to pay their fair share. Really? The top 1% of all taxpayers in the US pays more in taxes than the bottom 95%. How fair is that? What that means is when the real estate and investment markets falter, the revenues decline that much more since the rich are more heavily vested and invested in those markets, leading to a shortfall and budget deficits for states and the federal government.

It is misleading to continue rhetoric that pushes the rich to pay still more in taxes in the name of fairness. What such rhetoric means in practice is that the upper middle class and those just below the top 10% will be forced to shoulder an ever heavier burden.
Indeed, the IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act.

Remarkably, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined. In 2007, the bottom 95 percent paid 39.4 percent of the income tax burden. This is down from the 58 percent of the total income tax burden they paid twenty years ago.

To put this in perspective, the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers combined.

Some in Washington say the tax system is still not progressive enough. However, the recent IRS data bolsters the findings of an OECD study released last year showing that the U.S.—not France or Sweden—has the most progressive income tax system among OECD nations. We rely more heavily on the top 10 percent of taxpayers than does any nation and our poor people have the lowest tax burden of those in any nation.
It also means that far too many people have no stake in seeing government spending decline since they're ever more reliant on government programs. They don't pay taxes and receive credits and rebates. Why would they vote against their interests, which means 134 million people have no interest in seeing government spending or the size and scope of government programs decline, even when those programs do nothing to actually improve the lives of these people.

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