Tax the Rich? We Already Do

[Can't tell the difference between politics and policy? Need personal advice of a political nature -- or vice versa? Send your question to Stumped. Questions may be edited.]

Dear Stumped,

We are constantly told the rich don't pay any taxes, but my father-in-law claims that the top 5 percent pay 50 percent of the income tax, while the bottom 45 percent pay none. How is this possible? It contradicts everything I've been told since I was 12 years old.

-- Larry Anderson

Dear Larry,

Well, clearly you haven't been reading the Wall Street Journal editorial page since you were 12 years old. If so, you might believe that only the rich pay taxes in this country. It's silly, really, how polarized we can get not just about differences of opinion, but also about underlying facts.

Your father-in-law is in the ballpark. According to the Congressional Budget Office, in 2005 the top-earning 5 percent of U.S. households paid 60.7 percent of all income taxes. You can find all the charts and graphs you'd ever want about this issue at the CBO's page on the distribution of taxes and income. (But don't all click at once. Wouldn't want to crash the site.)

That's a fact. What spin you put on it depends on your political leanings. Of course these households pay the lion's share of income taxes because they make a large share of income in this country -- 29 percent of all pre-tax income, to be precise. If you lean left, you could bemoan this income inequality. Or, if you lean right, you could bemoan the fact that this entrepreneurial minority is taxed well beyond its proportional share of income. To which those of you on the left can strike back with the observation that the effective income tax rates paid by these top 5 percent of earners is a relatively modest 17.6 percent, down from 20.3 percent in 1995.

The bottom line, which is a good term to use when we're talking about this stuff, is that the rich are still getting richer -- even as they pay an increasing share of the Treasury's tax revenues.

Some historic perspective is in order. In 1980, the top 5 percent of wage earners contributed 36.9 percent of all income tax revenue, a considerably smaller percentage than they do today, even though they faced higher individual rates. In 1995, the richest 5 percent of taxpayers contributed 45 percent of all income tax revenue. So as the rich have gotten richer, their collective contribution to the Treasury has gone up, even as their individual burdens, as measured by marginal tax rates, have declined. So any individual rich person may be paying less in taxes than he did a few decades ago, but as a group, rich people are paying more taxes than ever before.

Got that? Dizzy yet?

My own view is that the rich in this country are not undertaxed, and that they may have once been overtaxed. (Call me a reactionary, but once the government starts taking more than half of any additional dollar earned, that strikes me as confiscatory). There are plenty of oddities and injustices about our tax code, including the regressive nature of the politically sacrosant mortgage interest deduction, but the rich do pay their fare share of income taxes in this country.

Dear Stumped,

Should I stop reading the New Yorker? I only read it for the fiction anyway.

-- NA (as in Not Amused)

Dear NA,

If you were offended by the magazine's satirical cover featuring a flag-burning, pro-terrorist Barack Obama in the Oval Office, you probably do need to stop reading the New Yorker. For one thing, the magazine may be too clever for you -- the cover satirized not Obama, but the folks propagating the crazy rumors about him. Second, you need to relax more and get back in touch with your sense of humor. The cover was genuinely funny, and the New Yorker shouldn't have to censor itself out of fear of offending people who don't read the magazine.

Also, it's way too long for a weekly, don't you think? Who's got the time to go beyond those clever covers and the cartoons?

Dear Stumped,

If I had to choose only one, should I watch the Olympics or the two conventions?

Ann Sommers

Dear Ann,

Go with the Olympics. Both TV extravaganzas are quite similar -- endless in-studio gabfests about moving human-interest stories, with little direct coverage of the underlying action. But the Olympics promise more entertaining ads.

By Andres Martinez |  July 18, 2008; 12:00 AM ET
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Comments

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This feature and its author are both profoundly annoying. Answers are not to be found here, but there sure is plenty of right-wing opinion.

Why can't newspapers just report the bloody news? Why all of this insipid chicanery? Time to cancel that subscription, it appears, because I'd rather see my money spent on actual journalism.

Posted by: William J. | August 2, 2008 12:27 AM

If people like Warren Buffett and Bill Gates say the rich are not paying their fair share, something must be wrong with our tax structure. My ex is a CPA and he took great glee in winning arguments for rich clients against the IRS. He cheated on our tax returns also. The midddle class are the ones with the greatest tax burdens and very few loopholes.

Posted by: Doris. V. Albuq. NM | August 1, 2008 11:26 PM

El Wapo: Figures lie, liars figure.

Posted by: capemh | July 19, 2008 12:05 AM

An interesting point though I'm a bit disappointed that you looked at the figures on a purely percentage basis without getting into the actual number of families and their incomes. A quick download of the CBO figures leads to some interesting analysis:

In 1979 the top 1.2%, or 400,000 American families, had average incomes of $479,400, sharing $184.6 billion. By 2007, the top earners made up 1.03% of the population, (500,000 American families), earning $1,384,300 each that year. They split $729.5 billion.

In 1979 the bottom 15.87%, or 5.1 million American families, had average incomes of $12,200, sharing $61.9 billion. By 2007 those at the bottom made up 18.83% of the population,(9.6 million American families), earning $12,400 each that year. They split $119.2 billion.

Thus families earning the most in America garnered a pay rise of $904,900 or 189% over the past quarter century. Those at the bottom managed a pay rise of $200 or 1.64%.

I'm not going to argue the tax policy, but there's quite a gulf between the ability of a family living on $12,400 to pay taxes and one living on over $1.3 million. I'm just thankful to have been blessed not to have been born into the bottom of the American pie.

Posted by: Londan | July 18, 2008 11:59 PM

If we tax 100% of their wealth, they no longer have wealth. Then who pays? Like killing the goose who layed the golden egg. The reason we tax income and not wealth is because the rich(like our political party leaders) have already made their money, their income is no longer important to them. They just don't want the little people to have that oppertunity.

Posted by: KarlMarx | July 18, 2008 11:59 PM

Boosterprez, Gramm was right in a sense.

He was a key player in re-writing our housing lending laws in 1999. He then cashed out in the private sector and has made out a substantial fortune by trading on those legislative favors.

Meanwhile ordinary tax-payers are bailing out the mess that he played a large part in creating.

Gramm isn't whining -- much in the same way that criminals and thieves don't tend to whine until they are held to account. Then they really start complaining.

As far as the "rich" handing out jobs this idea is maybe the stupidest thing that I've ever heard.

Employers hire people because those jobs increase profits. If a worker's role within a company is not profitable, that person loses their job -- the employer still retains the profit from when that person was an employee. The benefits of employment are a two way street. Strong nations tend to have a more favorable balance between employers and the employed than undemocratic dictatorships, oligarchies, and autocracies. That's just a statement of fact.

As far as whining goes, I'd be curious to hear what right wing geniuses take is on the Declaration of Independence -- a document that had an awful lot to do with political and economic grievances.

The real whiners are people who insistent that paying more than 15 percent on investment income; or 33 percent in tax is tantamount to a monumental injustice.

My own grandparents on one side paid taxes at 50 and 70 percent without complaint. It was that money which helped to build the U.S. economy during the second half of the 20th century -- and which helped to provide strong economic futures for many of today's multi-millionaires (those who didn't just inherit wealth).

Posted by: JP2 | July 18, 2008 10:59 PM

Phil Gramm was absolutely correct...we are a "nation of whiners"...the whining on this board is absolutely pathetic. The Left's constant insinuation of class warfare is having an effect!

The "wealthy" are very often the ones who give all of you mutts a job, for chrissakes! They are the ones who assume the risk of putting in their own capital to start a business, devise a business plan, hire employees, and create a product or service that adds to our GDP.

Where will there incentive be to invest, build, hire and produce if all of their efforts are taxed to the hilt????

Capitalism and free markets are the best thing for this nation...they are the reason any (and all) of us have a chance at the American Dream. Income/Wealth redistribution is Socialism to the core, and it will rob our nation of the creative spirit that keeps us so vital.

So quit whining!!!!

Posted by: Boosterprez | July 18, 2008 9:59 PM

The rich are obviously smarter and work harder to make more money than the liberal losers. Start working and quit commenting.
Earn your own damn money and quit sucking off of the hard working, money saving rich. I worked my way thru school, started my own business, invested wisely, and retired with my own money. Make your own and leave me alone.

Posted by: TWOTIMETUNA | July 18, 2008 9:27 PM

I'd add to my previous comment that, unlike the ultra-rich, the middling rich -- and especially the middle class -- pay a "hidden tax" in the form of interest payments on debt (be it on home loans, student loans, or credit card debt). Those debt payments are a direct benefit that the ultra-rich enjoy to a much greater degree than someone in the middle class who might receive some indirect benefit through small scale investments in the financial system (if that person or family even has any investments!).

Those debt payments function as a kind of tax on a large number of Americans.

The middle class also has a lot less political leverage in terms of the way that the tax code is shaped (and in some cases grossly distorted). They also don't derive a tremendous direct personal benefit from the socialized risk poll that we've seen in action during recent financial crises like the S&L bailout or the current housing crisis.

In terms of economic benefit that's another side of the coin that should come into play when looking at tax policy. It's not enough to look just at what a person pays -- it's important to also get a sense of what kind of economic benefit they derive.

Posted by: JP2 | July 18, 2008 9:27 PM

Great analysis Andres. The historical take though should be balanced out by looking at the changes in marginal rates over time (e.g. 50 percent in the 1980s -- for decades before that in the 70 percent range as high as 90 percent during the post-war era).

It's worth noting that those exceedingly high tax rates during the 1940s to the 1980s also were in place during a time of record economic expansion.

The other side of the coin here to ask: What benefit do top-income earners receiving from living in the U.S. (e.g. in terms of the highly educated work force; strong political institutions -- at least pre-Bush; and investments into the economy and national infrastructure paid in by previous generations). This side of the coin is much harder to quantify, but I don't think there's any question that the top income earners derive a disproportionate share of the benefit of living in the U.S. -- compared to the rich and the ultra-rich of previous generations -- never mind the comparison in relation to the middling rich, the middle class, and the poor.

I don't think there's any question that the historically low tax rates right now at the top -- the lowest since the Great Depression (except for a short hiatus during the late Reagan-Bush years) -- are unhealthy for both political institutions and the overall health of the U.S. economy over the long term. The economic prospects for ordinary Americans are substantially worse than they were for previous generations -- those changes are due in no small part to changes in the tax code and spending priorities at the federal level over recent decades. More Americans work harder and face greater economic insecurity than at any time in recent memory. We've taken some big steps backwards.

Posted by: JP2 | July 18, 2008 9:13 PM

Amazing article and the whining commentary from wealthy and wannabee wealthy sycophants.

If the rich are paying 65% of the taxes at the rate they are paying them that is because they control most of the revenue coming in. The top 1% make almost 8 times more than the median income of most Americans. And that is not including the super-rich who make more than 10 times as much as the to 1%.

At this point the top 1% are grossing 350,000 and up in pre-tax income. The Tax rate rewards people who clip coupons and punishes them for holding a job. Even so they are left with plenty of riches after paying taxes, yet they whine about how they have to bear a burden for the system we have that makes them even richer every year.

Posted by: Chris Holte | July 18, 2008 7:22 PM

This post ignores the impact not only of payroll taxes but also of state and local taxes, which tend to be regressive (sales and property taxes, mainly). If you take everything into account -- all taxes paid at federal, state and local levels -- the U.S. practically has an overall flat tax system. At least that was the case as of early 2003 when Tim Noah wrote about it in Slate (http://www.slate.com/id/2077294/); since then the Bush tax cuts have been fully phased in at the federal level, so now the overall tax structure is probably slightly regressive.

Posted by: Ann Arbor | July 18, 2008 6:23 PM

Wealth has been redistributed to the point of feudal conditions. Let the aholes pay for their cake. It amuses me no end when bubble-boomers whine about what baseball players get paid. At least they get off their asses and perform discernible work every day.

Posted by: caliban | July 18, 2008 5:55 PM

It's gratifying to see that liberals are finally admitting that FICA is a tax, not a contribution to a retirement program, and Social Security payments are Welfare, and not returns on investment. Of course, when that argument suits them, they'll revert to it, but for now they're on the right side.

Those who earn more than 105k do pay at a lower marginal rate than those immediately below 105k, thanks to the FICA limit, but they also don't earn any right to future Social Security payments. Eliminating the limit is fine, but you're just going to have to pay those rich folks back for their extra contributions someday. And if you don't, the whole Social Security scam is going to be revealed for what it is.

Posted by: AK | July 18, 2008 5:53 PM

Let's play with words. Instead of saying:

- "So as the rich have gotten richer, their collective contribution to the Treasury has gone up, even as their individual burdens, as measured by marginal tax rates, have declined."

Let's try:

- "So as their individual burdens have declined, their collective contribution to the Treasury has gone up."

You know, that almost sounds like "Tax Breaks For The Wealthy!" might actually be a good idea for the Nation. Could it be? I agree with the writer's opinion, just pointing out how easy it is to play upon emotions.

Hey opinion-makers: I'd like my facts with the demagoguery on the side please. And, come to think about it, hold the demagoguery. Thanks so much.

Posted by: Rich | July 18, 2008 5:42 PM

There seems to be some confusion regarding the social security tax and its original intentions, although the inital topic was about income taxes. The original fully implemented income cap was $100,000 ($3k maximum tax paid by employer and employee). You could argue about indexing this for inflation, however the tax rate has more than doubled, taking some, but not all, the steam out of that line of argument. I love the line at the very end, $3k, the most you will ever pay!

From the social security administration's original mailer:

YOUR PART OF THE TAX

That is to say, during the next 3 years, beginning January 1, 1937, you will pay 1 cent for every dollar you earn, and at the same time your employer will pay 1 cent for every dollar you earn, up to $3,000 a year. Twenty-six million other workers and their employers will be paying at the same time.

After the first 3 year--that is to say, beginning in 1940--you will pay, and your employer will pay, 1.5 cents for each dollar you earn, up to $3,000 a year. This will be the tax for 3 years, and then, beginning in 1943, you will pay 2 cents, and so will your employer, for every dollar you earn for the next 3 years. After that, you and your employer will each pay half a cent more for 3 years, and finally, beginning in 1949, twelve years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay.

Posted by: JimDandy1 | July 18, 2008 4:52 PM

Tax 'em more. They've got all the money.

Posted by: John | July 18, 2008 4:29 PM

"...once the government starts taking more than half of any additional dollar earned, that strikes me as confiscatory."

Which is fine, especially since we're not even close to this extreme.

Let's consider a wage-earner taking in a salary in the millions. What's the marginal federal tax rate on the top dollar of this person's income? Because of the AMT, it's 28%, plus 1.45% Medicare tax, for a total of 29.45%.

So let's stop this nonsense about hitting half of income, shall we?

Now consider a single person earning $95K. The marginal federal income tax this person pays is either 25% or 28%, based on the amount of deductions this person can claim. But he or she is also subject to 6.2% Social Security tax on every dollar of earned income, so this person's marginal federal tax rate is as high as 35.65%.

But it gets worse. When you consider that the employer pays FICA as well, the spread widens. Suppose the second person is self-employed. He or she then pays the employer's side as well, which means that the overall marginal federal tax rate tops out as high as 42.2%

How about we remove the $97,500 limit on Social Security taxes (as was originally intended when the program was initiated)and then talk about rates?

Posted by: BS Detector | July 18, 2008 4:26 PM

Regarding how much taxes the rich pay: There is no tax on wealth. only on income. Income may be avoided by investing though investments in securities that do not pay dividends and through use of margin expense to offset the amount of income may remain. IRS has no measure of wealth and would not regard it as its immediate business.

Posted by: Sam Revusky | July 18, 2008 4:26 PM

Morons! All of you.

Every time an American CEO sticks his head out of his office to say Good Morning to his secretary, he makes a $ 100,000.

There are two variables here, not one: income and taxes. If we raise a man's salary from $20 million/year to $200 million, his "tax burden" is going to rise by a factor of 10. That still makes him a cameo of American greed, selfishness and gluttony.

If incomes rise exponentialy for the rich (as they have recently), so should tax RATES, to bring these incomes down to tolerably just levels. No one "deserves" to make more than $ 20 million/year. Americans who make than that should be taxed at a rate of 80% !

Posted by: Liberal and Proud of It | July 18, 2008 4:04 PM

dear stumped: the cover was not funny. and i don't mean it in an "i'm so offended" way. i mean it in an "i just watched a bad sit-com and didn't laugh once" kind of way. calling it "too clever" for anyone who didn't find it funny just makes you condescending. don't worry- i *got* the joke. i even agreed with the sentiment. but that still didn't make it well-done or funny.

Posted by: jenms | July 18, 2008 3:44 PM

A bunch of wise guys get together and found a "nation". Borders suddenly materialize and those who are not with "us" are declared aliens and they may not cross the border and join us on our side of it. To enforce the separation we establish a militia and populate it with those who are ready to die for the nation (never mind that no such thing existed until yesterday) and those who have few other options in life. We establish a government to enforce rapidly escalating rules of "dos" and "don'ts" and taxes are levied to pay for the government. Some don't see the need for a government because they are rich and powerful, and they know how to take care of the themselves, thank you. We start quarreling about who should pay how much in taxes. Who wins the argument? The rich and the powerful who already own the government. They reform the tax code and come up with a formula whereby the secretary who makes $30,000 pays taxes at double the rate at which her boss pays his "fair share" although he takes home 400 times as much. The secretary complains now and then but nobody pays much attention. The boss complains constantly, and recruits some of the $30,000 folks to join in his complaints, and the movers and shakers are always looking for ways to lighten his burden.

Then we get up on the rooftop and cry: "See, we have the greatest economic system on earth."

Posted by: R M Gopal | July 18, 2008 3:13 PM

In the US, a 67% income tax on the top 1% could pay all the wages of the bottom 50%. That's not to say that it's a good idea, but it's important to understand what our winner-take-all economy really means.

By the way, those top 1% are people making more than $300K per year. The highest federal tax rates are paid not by them, but by the kind of people who read this paper. If you make $115K per year (just below the top 5%) then you pay FICA on almost every dollar of your income, and THEN you pay your income tax. If you are single and own your own place in or near DC, then you are vulnerable to the Alternative Minimum Tax, which means your federal income tax rate is 26% or 28% of the gross. And that's just the federal portion of your tax. And then the feds use almost half of your tax money to write checks to wealthy people, many of them overseas, who invested their money in US treasury bonds to finance the US deficits over the last 25 years. And that's just for the interest on the bonds: it still leaves the $10 trillion in debt itself for your kids to pay off...if you can afford to have kids. Now THAT's a real wealth transfer program! Do you feel like a sucker? Thank GOP.

Posted by: Chase | July 18, 2008 3:12 PM

I think we get into some difficulty when we try to figure out if the weathly class is paying too much or too little of the overall tax bill. That is, from my perspective as a middle-class worker (drone), the wealthy class will never carry water for me.

Let's face facts. The amount paid by anyone will always be too much or too little as compared to an individual tax payer, depending on the amount paid by that individual. If my neighbor pays less than I do, then I say "tax my neighbor more!" If my neighbor pays more than I do, then I say "thank you!"

There is a willingness on my part to get my neighbor to pay more than I do. Think about all of the sports stadiums in this country. Each of us is willing to "make our neighbors pay for the stadium" by voting for a tax levy.

The problem as I see it is the government provides infrastructure and services for the PUBLIC -- a large undifferentiated group of people. Everyone is treated as the same kind of consumer of government services. Thus, there is one price for each service.

As an example, take public education. Every student uses the same school building, teachers, lunch room, etc. But the taxes paid for this public service do vary, depending on assessed property taxes.
But what if my child has special needs, and thus uses more services. Should I pay more? Or what if my child goes to a private school, should I still pay for the public school ? I would likely advocate for school vouchers, or some method of allowing me to pay for the school services I really need and want.

I think we could be better off if the government scaled back its services, and taxes. Let people buy the services they really need. I know this sounds like a GOP platform issue (I am a registered DEM and Union member). But taxes should be lowered for everyone, I feel, because the government is overreaching with its multiple and ambitious programs.

Posted by: Richard | July 18, 2008 2:54 PM

FICA is a con-job. Assume your employer could stop paying your FICA and gives you a 8% raise, but YOU had to foot the entire bill of around 15.5%. People would FREAK about paying that much below the cap when they look to see how much those "tax credits" would pay them in retirement.

The ceiling of 98K is there because if they raised the ceiling, then the government would have to give more "credits" to those paying above that rate. Fair is fair. Why should anyone pay MORE into SS and get no additional gain?

That's why it galls me to see people screeching about there being a SS ceiling. If you think people with higher incomes should pay more taxes, fine. Raise the marginal rates on income, don't do it under the guise of Social Security.

To all those whining about "the rich" only paying FICA on 98k, have a cup of STFU.

Posted by: HankTheCat | July 18, 2008 2:17 PM

That's the problem with socialism. If you tax five rich people and spread it around among ninety-five non-rich people, it doesn't amount to all that much, even if you would tax the rich 100%.

But if you create more well-off people who will share the tax burden, everybody benefits. The middle-class always carries the load, the poor never do.

Posted by: bodo | July 18, 2008 2:04 PM

First, taxes were meant to be based on wealth - not labor.

The top 10% of Americans own 80% of all wealth, but they only pay 70% of the taxes.

So, they are not overtaxed - the middle class is.

Posted by: PG Proud | July 18, 2008 1:55 PM

The taxes/income piece seems wonderfully fair and balanced. Let's look more closely.

In the US, the top 1% receive about 20% of all income and control about 40% of the country's wealth. They pay about 30% of all income taxes.

However, the US collects almost as much revenue in FICA taxes ("insurance contributions") as it does in income taxes. Those FICA taxes are paid by the bottom 80% of earners. In fact, the top 1% pay less than 15% of total revenue, less than the share of income they receive.

Partly this imbalance is because income from wealth is taxed at a lower rate (15%) than income from work. And the workers pay two taxes on their wages instead of one.

Our tax system favors the rich.

Now, you can argue that this is fair because FICA supports Social Security and Medicare, which benefits the bottom 80%. But if you say that, then you must agree that it is only fair to raise income taxes to pay back the $2 trillion borrowed from the Social Security trust fund. Good luck with that.

Also, the rich get a lot of their tax money back. We pay about 30% of our income taxes back in interest on our treasury bonds we issued to cover our 10 trillion worth of deficit spending. Many of us hold some of those bonds, but those top 1% hold a lot more than you do!

And the fact is that the rich are controlling more and more of our country's wealth. Over the last quarter century, the portion of the national income accruing to the richest 1 percent of Americans has doubled. The share going to the richest one-tenth of 1 percent has tripled, and the share going to the richest one-hundredth of 1 percent has quadrupled. That's the Republican Revolution!

Posted by: Chase | July 18, 2008 1:51 PM

"...but the rich do pay their fare share of income taxes in this country."

That's a bold statement for anyone writing in the WaPo, besides a conservative op-ed of course.

Thanks for shedding some light in a shamefully dark but well-travelled area.

Posted by: The Angry One | July 18, 2008 1:34 PM

"Enough freebies, I do not owe anyone a thing."

-zendrell

If you have any religious scruples, zendrell, you have committed the ultimate blasphemy. If not, you have disowned your hapless parents -- at a minimum.

Posted by: R M Gopal | July 18, 2008 12:51 PM

"I also agree that quickly passing over the rate differential between low and high income individuals is a mistake. When extremely highly compensated hedge fund managers are paying only a 15% tax rate on income they choose to recognize (which really means an effective rate well below 10% because wage earners can't choose to put off paying tax on their income by not recognizing it in a given year), while the wage earners among us are paying payroll taxes of nearly that rate from the first dollar plus average income tax rates that are often above that, something isn't quite right, no matter what proportion of federal income taxes on a standalone basis are paid by the top 5%."
===========
Absolutely agreed. I like to think of, instead of looking at the percentages of tax dollars paid, that we should think about what I call "undue burden." For the Family making $35,000, the actual tax rate may be much lower than on the family making $500,000, but which tax rate places an "undue burden" on the family in terms of fulfilling the needs of that family?

In addition, especially for those of us owning small businesses, who bear the entire burden of FICA taxes, I am not comforted by the thought that the wealthy pay the majority of taxes collected in this country, especially as I struggle to meet my payroll tax obligation at the end of the tax year. The fact that some wealthy Investors only pay 15% Capital Gains on "accumulated wealth," while I struggle to pay twice that amount, also chaps my hide quite honestly.

I don't advocate going back to the truly onerous tax rates of previous decades (where the rich were expected to pay up to 90% of their income like in 1913), but I do expect some sort of tax parity. I guess I have to trott out that old Democratic dogma that if it weren't for the hard work and sweat of the American Worker that the Rich wouldn't be in their comfortable position.

Posted by: radical_moderate | July 18, 2008 12:46 PM

So the super-rich Americans are paying taxes at the rate of, what, 35%? [Upon their "adjusted" income, which is another story in itself.] Something does not quite add up here. Here's why:

Warren Buffet paid taxes last year at the rate of 17.5 %. Mr. Buffet's secretary paid at the 35% rate. If a bright fourth-grader were to ask how much more secretaries make than their bosses, what would the architects of our economic system say to the kid?

You rightwingnuts who constantly bellyache about the poor overtaxed rich Americans, why don't you try to explain your sophistry to the fourth-grader first?

Posted by: R M Gopal | July 18, 2008 12:38 PM

This specious argument used by the wealthy (and I might add selfish) conservatives is similar to saying that 95% of the meals consumed at the French Laundry restaurant in Napa are consumed by the 2% of the people in the highest income brackets. Of course they are--they're the only ones that can afford to dine there on a regular basis. If one were to examine the % of income LEFT in the hands of the wealthy after they have paid life's necessities including tax I think one would have a far more realistic picture. One should include the mortgage deduction on the million$ house the fact that they only have to pay SS up to 98,000 (and you just know they would complain if they didn't get it whether needed or not) you wonder why those who have benefitted the most in the benefits the country offers complain so much. If they think it is so great to be the fortunate couple who make 40k a year--tell them to swap positions and then see how quickly they take the offer. There is a powerful smell of hypocrisy and mendacity in the whole conservative low tax argument! As a good frienf once said--why do we have to take care of the rich - they're perfectly capable of taking care of themselves.

Posted by: bigustom | July 18, 2008 12:28 PM

Hey, instead of all these handouts to the poor that they so obviously flitter away, tax them also or have them pick up a broom or shovel and clean up their community. Thank to all those bleeding heart liberals we have gone from a nation respects picking yourself up off the floor, to a nation that always NEEDS a handout. Enough freebies, I do not owe anyone a thing.

Posted by: zendrell | July 18, 2008 11:58 AM

let's not forget the plethora of regressive taxes paid by the average wage earner making under 100K. In NJ, homeowners pay an average property tax rate of $6,500. Add in sales taxes, motor vehicle fees, social security and all the other payroll deductions, and Joe Lunchbox is paying an effective tax rate of maybe 50%!
Meanwhile, he can't deduct the mortgage on his second home (because he doesn't have one) or write off his hummer as a business expense, or shelter his income in overseas dummy corporations.
Despite this unfair taxation, though, the blue collar man will be more concerned about whether or not two gay people want to get married than disproportionate taxation. Maybe he deserves his fate.

Posted by: jerzeyjoe | July 18, 2008 11:27 AM

Stumped does not mention the indolent rich-- the trust-fund babies who live off capital-- who pay only 15% capital gains tax. Speaking of only income taxes is appallingly misleading. I'm very disappointed in Mr. Martinez.

I believe it was Warren Buffet who pointed out that he has a lower tax rate than his secretary, when all taxes are (rightfully) included.

Posted by: ??? | July 18, 2008 10:14 AM

Since the rich don't pay social security tax on their income over 90K they are actually the lowest taxed wealth of any of the industrialized nations.
I agree with the other commentators half the people on the street know more about the issue than the so-called experts the Post is representing.
However, I am beginning to see less and less difference between the Post and the Times - both filled with demogogary from the right in place of well informed, well written arguments.

Posted by: Jack | July 18, 2008 9:56 AM

Hey. I'm just as snobbish, intellectual, able to understand the nuances of the post modern use of the word "satire" as most people. Except those who live in the chi chi ghettos of our larger, more hip, Metropolitan enclaves. You know: places where people have never seen a bar of Ivory Soap, read restaurant reviews to discover what they're eating this week, etc.

I'm sure many 'sophisticated' people tinkled in their panties/boxers when they saw the New Yorker cover. Another opportunity to exhibit their envelope-pushing intellectual name-dropping and pitch perfect edge-cutting humour.The conversations must have been replete with erudite art history allusions and paraphrases from the last four NYT Magazine issues.

Out here in the Great Frozen North [which the literati and glamorati see once a year for two weeks and stray not from a swath no more than two miles from the coastline], we natives, quaint as we are, are likely to view the cover with the same headshake that ironlung, Pollack, and amputee jokes elicit.

Get a grip. Being able to define the satire in the NY cover, doesn't also qualify anyone to then assert that the satire, per se, is harmless. In addition, while no one should be censored for being an a$$h*le, no one should be required to applaud. F*rting in a theater may be an accident; a comment on the underlying decadence and rotten core of the characters in the film; or the result of some jerk with a well-developed understanding of satire and self-censorship.

If the cover was intended to mock the people who hold those beliefs satirized by the cover are not somehow including in the cartoon to give a [sophisticated] context clue, then the harm redounds soley to the Obamas and satire becomes instead the intellectual fig leaf behind which metro-intellectuals hide.

Posted by: garypighetti@gmail.com | July 18, 2008 9:51 AM

If the highest brackets are unhappy with the taxes they pay, then I heartily invite them to reduce their income. Problem solved!

...Wait, you mean people don't want to do that? You mean being in the highest brackets still means you have gobs of money after taxes? I'm shocked!

The mega-rich never catch a break. First you expect them to pay their share of taxes, then you call their yachts ugly? Gosh, life is so hard.

Posted by: schala | July 18, 2008 9:43 AM

What gets lost in the debate of taxation and fairness is the actual dollar amounts that taxpayers get to keep. While the percentages that the top income earners contribute to tax collections are higher than those of lower income brackets, the dollar amounts they keep are significantly higher. For example, if a person makes $100 million a year and is taxed at 90%, he gets to keep $10 million. That still is way more than someone who earns $30 thousand a year and is taxed at 30%. When you factor in cost-of-living expenses, who has it better off, the richer person with a higher tax rate, or the rest of America?

The real numbers aren't displayed, because if they were, taxation would be collected *only* from the rich, instead of just mostly.

Posted by: SargeOo | July 18, 2008 9:29 AM

I find it astonishing the Washington Post finds it appropriate to host this periodic display of ignorance and comically unfounded arrogance. One must assume the bloviation level is attracting clicks, there can be no substantive rationale.

Posted by: Anonymous | July 18, 2008 9:27 AM

And all of this discussion focuses primarily on income. There is virtually no mention of all the other REAL taxes and fees paid disproportionately by lower income people such as sales tax, automobile registration, etc. There is also no discussion about the EFFECTIVE tax on the poor who don't have access to health insurance and other services available to the rich. This is bogus argument foisted on the reader by the very people who have the resources to do it.

Posted by: 0nl00k3r | July 18, 2008 9:21 AM

This chart also included CORPORATE income taxes, exaggerating the amount of tax paid by the top quintile.

It also ignored the portion of their income they are able to shield, an interesting feature of our tax code that the other quintiles do not have available to them. This causes their income to be understated.

A more interesting chart would be to plot taxation against wealth rather than income.

But it isn't how much you pay in taxes, it's how much you keep afterwards. Remember, income taxes are (now only mildly) progressive, with higher rates charged against higher MARGINAL income, not ALL income.

This actually results in a flat tax, with everyone paying the same percentage on their first thousands of dollars of income, the same on their second, their third, etc., etc., etc. It is higher on the subsequent increments of income in recognition of the fact that those first dollars go to bare subsistence, the next makes things a little easier, the next makes it more comfortable, the next begins to buy luxury, the next buys security for your potentially indolent offspring, and the last increments buy power over others. This is why higher increments are PROPERLY taxed at higher rates in any truly just society, and in reducing the progressivity of our tax rates we have unbalanced our entire society in favor of the power of the rich.

And that's why we non-rich are getting angrier, as this trend accelerates.

Posted by: Woody Smith | July 18, 2008 8:42 AM

This chart also included CORPORATE income taxes, exaggerating the amount of tax paid by the top quintile.

It also ignored the portion of their income they are able to shield, an interesting feature of our tax code that the other quintiles do not have available to them. This causes their income to be understated.

A more interesting chart would be to plot taxation against wealth rather than income.

But it isn't how much you pay in taxes, it's how much you keep afterwards. Remember, income taxes are (now only mildly) progressive, with higher rates charged against higher MARGINAL income, not ALL income.

This actually results in a flat tax, with everyone paying the same percentage on their first thousands of dollars of income, the same on their second, their third, etc., etc., etc. It is higher on the subsequent increments of income in recognition of the fact that those first dollars go to bare subsistence, the next makes things a little easier, the next makes it more comfortable, the next begins to buy luxury, the next buys security for your potentially indolent offspring, and the last increments buy power over others. This is why higher increments are PROPERLY taxed at higher rates in any truly just society, and in reducing the progressivity of our tax rates we have unbalanced our entire society in favor of the power of the rich.

And that's why we non-rich are getting angrier, as this trend accelerates.

Posted by: Woody Smith | July 18, 2008 8:41 AM

As Roscoe has already pointed out, leaving out Social Security and other payroll taxes is highly misleading. Most people don't distinguish between the various Federal taxes when they are taken out of their paycheck.

I also agree that quickly passing over the rate differential between low and high income individuals is a mistake. When extremely highly compensated hedge fund managers are paying only a 15% tax rate on income they choose to recognize (which really means an effective rate well below 10% because wage earners can't choose to put off paying tax on their income by not recognizing it in a given year), while the wage earners among us are paying payroll taxes of nearly that rate from the first dollar plus average income tax rates that are often above that, something isn't quite right, no matter what proportion of federal income taxes on a standalone basis are paid by the top 5%.

Posted by: AC | July 18, 2008 5:48 AM

Being rich means you get to choose who runs the country, or, at the very least, you get face time with those who do. Your policy decisions get implemented. That's worth something. I would advocate a touch of additional tax on the wealthy in the form of a Net Worth tax. Also, enforcement of laws against moving assets out of the country to evade taxation. When Mr. Gotrocks goes to war, he doesn't personally pick up a rifle and shoot at his enemy. He hires help to do that. He hires KBR to put in faulty electrical appliances so that highly trained and motivated military men can be electrocuted in their showers. Such concern for the well being of the help should be rewarded with higher taxes on the wealthy.

Posted by: BlueTwo1 | July 18, 2008 3:00 AM

(a) The biggest problem with this discussion is that "rich" is properly measured by assets, not income.

(b) "According to the Congressional Budget Office, in 2005 the top-earning 5 percent of U.S. households paid 60.7 percent of all income taxes." No, they paid 60.7 percent of all _Federal_ income taxes.

(c) The rich get much more benefit from government than the rest of the population---particularly in the form of economic rents (especially land rent), hence ought to pay more, as Adam Smith recognized.

Posted by: liberal | July 18, 2008 2:22 AM

The writer also fails to mention that the top 5% of income earners pay far less than the bottom 95% in Social Security taxes. Because Social Security taxes are only assessed on the first $102,000 of income, most high income earners only pay Social Security taxes for a couple of months, and for the very wealthy, a couple of weeks per year, whereas the middle and working class pay Social Security taxes all year long. Cry me a river.

Posted by: Roscoe | July 18, 2008 12:56 AM

Addition, condition his answer around the top 5% is highly misleading. Since 1980, the top 1%, and particularly the top 1/10 of 1%, has vastly increased its share of national income, despite across the board productivity increases at every level of society.

The group from 5% to 1% has increased their income --roughly --at an overall average rate of 1% a year in the same period.

Is this guy Fred Hiatt's secret identity?

Posted by: Tim Connor | July 18, 2008 12:39 AM

The simple answer which "Stumped" did not provide --either because they are stupid or have a hidden agenda --is this. 1. The richest 1/10 of 1% pay a SMALLER percentage of income as taxes. 2. Their proprtionate share of the national income has increased geometrically, while everybody else's has decreased. Thus they pay a larger proportion of tax dollars.

Suppose that, at one time, the rich had 30% of the national income and paid 50%. Their contribution would have been 15% of the national income. If everyone else averaged --say-20% on 70% of the national income, their contribution would have been 14%. Each group would have paid about 1/2 of the taxes.

Now assume that the riches 1/10 of 1% increases its share of the national income to 50%, and pays and average of 30% tax. Their tax contribution would be about 15% of national income.

However, assume the "other" group, everyone else, continues to average 20% tax on the other 50% of income, for a 10% contribution.. The rich would have increased their share of the total taxes paid, while paying a smaller percentage of income in taxes.

These numbers are illustrative. They demonstrate how it is possible to pay a smaller % income in taxes, and still pay more tax DOLLARS, if your income goes up sufficiently.

This, by the way, is actually the case, well documented by David Cay Johnson and others.

So my response to his misleading answer is --big deal. It does NOT mean the rich are paying their fair share.

Posted by: Tim Connor | July 18, 2008 12:34 AM

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