August 8, 2012

The Rich Pay Their Fair Share in Taxes

and then some

Are Americans eager for higher taxes on the affluent?

Barack Obama and his allies clearly think so. The president who came to office vowing to “spread the wealth around” by raising taxes on individuals with incomes above $200,000 is doubling down, making a tax hike on the rich the centerpiece of his campaign for reelection.

“We should ask the wealthiest Americans to pay a little more,” he urged a White House audience last week. “We’re talking about folks like me going back to the tax rates that existed under Bill Clinton…. And here’s the thing – there are a lot of well-to-do Americans, patriotic Americans, who understand this and are willing to do the right thing, willing to do their part to make this country strong.”

An Obama campaign ad summarizing “President Obama’s plan” drives the point home succinctly. “Wealthy Pay More,” the on-screen title says; “Middle Class Pays Less.”

Meanwhile, the union-funded activist group Americans United for Change is out with a quarter-million-dollar ad blitz denouncing Republicans who won’t “make the richest 2% pay their fair share in taxes.” Adding to the class-warfare clamor is Senate Majority Leader Harry Reid, with his preposterous accusation that Mitt Romney “has not paid taxes for ten years,” thanks to the “many tricks” for avoiding taxes that “people who make as much money as Mitt Romney have … at their disposal.”

Few things get liberal Democrats salivating like populist red meat. But if voters generally shared the left’s weakness for soak-the-rich nostrums, Nancy Pelosi would be speaker of the House, the Occupy movement would be riding high – and Republicans would still wince at the memory of Ronald Reagan losing the White House to Walter Mondale in a 49-state landslide.

But voters, by and large, don’t yearn to see the wealthy stripped bare by the tax collector. In a new nationwide poll, Gallup asked Americans to rank a list of policy proposals for the next president to address. Respondents gave highest priority to “creating good jobs,” “reducing corruption in federal government,” “reducing the federal budget deficit,” “dealing with terrorism and other international threats,” and “ensuring the long-term stability of Social Security and Medicaid.” Raising taxes on the wealthy placed last. Even among Obama supporters, no issue on Gallup’s list was deemed less important.

Blasting the wealthy for not paying their “fair share” in taxes may rev up what Howard Dean called “the Democratic wing of the Democratic Party.” But measured by any reasonable yardstick, rich Americans pay their fair share. And then some.

One reasonable yardstick might be the average rate paid when all federal taxes – including not just income taxes but also payroll taxes – are considered. The Congressional Budget Office reported last month that in 2009, the top 20 percent of taxpayers paid an average of 23.2 percent of their income in federal taxes – more than double the 11.1 percent paid by the middle quintile, and 23 times the 1 percent paid by the lowest quintile. Even within the top 20 percent, average tax rates rose with income: The richest 1 percent paid 28.9 percent of their earnings in federal taxes.

Or perhaps a more reasonable yardstick would compare the share of federal taxes paid with the share of national income earned. The CBO ran those numbers too. In 2009, the bottom 20 percent of taxpayers earned approximately 5 percent of the nation’s income but paid just 0.3 percent of all federal taxes. Households in the middle quintile, which earned almost 14.7 percent of national income, paid only 9.4 percent of federal taxes. Yet Americans in the top quintile, who earned 51 percent of the nation’s income, paid a whopping 67.9 percent of all federal taxes.

And the much-demonized 1 percent? They took in 13.4 percent of all income in 2009 – and shelled out 28.9 percent of all federal taxes.

Reasonable minds can debate whether income inequality is good, bad, or neutral; whether “fair” tax rates should be flat or graduated; whether income-redistribution is a legitimate function of government. But what’s clear is that wealthy Americans pay plenty – far more than plenty – in taxes. Maybe that’s why voters aren’t clamoring to make them pay even more.

(Jeff Jacoby is a columnist for The Boston Globe. His website is www.JeffJacoby.com).

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