Class Warfare Blog

April 26, 2013

The Rich are Paying their Fair Share? Hardly!

On right-wing media sources you will hear them pounding the drum about how the rich are paying the bulk of “the taxes.” But this is an example of cherry-picking data, plus the data are always relatives (percents) and not absolutes. Let me show you why and how they do this.

For example, in 2005 the top 10 percent of households in the U.S. paid 45.1 percent of all income taxes (both personal income and payroll taxes combined) in the country. This was the highest of any developed country.

This is true, but . . . wait, don’t the bottom 47% of American households pay no income tax (the infamous “47%”)? So only the top half of household incomes are paying income taxes at all. So, this makes it much easier to build up a large percent of taxes paid by the top whatever. Basically the top 50% are paying all (100%) of the federal income taxes.

“The conservative holy grail of a flat tax has been achieved! We no longer have a progressive tax system.”

Note Please realize that this situation was brought about in a bipartisan manner as a way of supporting young families. It was not a nefarious plot by the poor and their myriad lobbyists.

And, what about Payroll Taxes? What about sales and property taxes?

Apparently when you take all of such taxes into account, the effective tax rate (including personal income taxes, payroll taxes, sales taxes, property taxes, etc.) everyone pays (rich, poor and in between) is about 20% of their income.

The conservative holy grail of a flat tax has been achieved! We no longer have a progressive tax system. Oh, it looks like one, but it ain’t.

Oh, and About Those Corporations . . .

Not only have the conservatives gotten households into a flat tax situation, look at what they have done with corporate tax receipts. Here are the data (source provided and please note these are actual receipts as a % of GDP so they are adjusted for growth in the economy):

Receipts by Source as Percentages

of Gross Domestic Product: 1934-2017

   

Fiscal Year

Individual Income Taxes

Corporation Income Taxes

1934

0.7

0.6

1935

0.8

0.8

1936

0.9

0.9

1937

1.2

1.2

1938

1.4

1.4

1939

1.2

1.3

1940

0.9

1.2

1941

1.2

1.9

1942

2.3

3.3

1943

3.6

5.3

1944

9.4

7.1

1945

8.3

7.2

1946

7.2

5.3

1947

7.7

3.7

1948

7.5

3.8

1949

5.7

4.1

1950

5.8

3.8

1960

7.8

4.1

1970

8.9

3.2

1980

9.0

2.4

1990

8.1

1.6

2000

10.2

2.1

2010

6.3

1.3

2011

7.3

1.2

Source: Office of Management and Budget, Historical Tables,
Table 2.3; http://www.whitehouse.gov/omb/budget/Historicals/
(Last accessed, April 13, 2012).

Start by noting that initially corporations and individuals paid at about the same rate (1934-1941). This continued until World War II when both individual and corporate rates jumped substantially (to pay for the war). But after the war, beginning in 1946, there was substantial downward pressure on corporate income taxes, but not individual income taxes. So, from being low and about the same to being higher and about the same, we end up with individual income taxes being six times higher than corporate taxes in 2011, and the individual taxes (in total, not just income taxes) have become non-progressive.

Shift the taxes off of corporations and onto individuals. Shift the taxes off of wealthy individuals and onto the poor and middle class.

Sound like a plan to you?

And they are still whining about how high corporate taxes and income taxes on the wealthy are! They aren’t done!

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6 Comments »

  1. The poor don’t mind, Steve.

    Hey, did Obama manage to close that loophole which Romney used to amass his IRA (or what the letters are?) in the Cayman’s?

    Comment by john zande — April 26, 2013 @ 12:00 pm | Reply

    • Nope. Obama is economically more conservative than Nixon was. He is appointing all kinds of corporate cronies to positions in his administration. he is disappointing in a great many ways and inspiring in others. We just don’t have a liberal estanlishment to counter the pressure from the right any more.

      Comment by stephenpruis — April 26, 2013 @ 12:07 pm | Reply

  2. On the question of regressive vs. progressive rates, we don’t have to look further than the top tax rates on earned income (up to 39.6%, + up to 7.65% in Social Security and Medicare taxes) vs. tax rate on capital gains (20% after the latest increase without any Social Security taxes, if I’m not mistaken).

    Comment by List of X — April 27, 2013 @ 1:17 am | Reply

    • Well . . . under Saint Ronald Reagan, capitals gains were taxed as ordinary income. We need the Ronald Reagan Fair Taxation bill that would reinstitute this policy!

      (I had to add the “Well . . .” that Reagan was famous for, e.g. Well, there you go again . . .” I can still hear his intonation.

      Comment by stephenpruis — April 27, 2013 @ 7:50 am | Reply


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