What is your “fair share” of taxes?
President Obama’s plan to balancing the budget, if I don’t mistake it, is to raise taxes on the wealthy. His argument is that the wealthy are not paying their fair share of taxes. If they were, we could pay down our debt and put our fiscal house in order.
“There are a lot of wealthy, successful Americans who agree with me because they want to give something back,” he said in a speech in Roanoke, Va., that set off dueling campaign ads. “Look, if you’ve been successful, you didn’t get there on your own.”
Private opinions can disagree, though, and they do. Says Joseph Thordike, a tax historian to the Wall Street Journal:
“Who’s right: Obama or Romney? Both. Or neither,” says Joseph Thorndike, a tax historian. “When it comes to taxing the rich, there is no single, objectively correct answer. You can talk all you want about asking rich people to pay ‘their fair’ share,’ but don’t kid yourself. You’re just trying to turn private opinions into public policy.”
“I’m struck” he adds, “how the facts can be used selectively by either side.”
If where the “fair share” line is up to private opinion, what does it say about President Obama’s opinion that, when the economy is struggling and unemployment is high, he wants to take wealth out of our country to balance the debt? Wouldn’t it be better to grow the economy and lower the cost of government? Why would we soak the rich–most of them owners of businesses and investors in businesses–at the very time capital is most needed to grow business and expand?
I recall, in an election past, attending a fundraiser for a candidate for President. The candidate himself was there, and though I was only there to help (hand out name tags, direct traffic, etc), I shook his hand and got a picture with him. While a good man and a patriot, he was not the person supported for the party nomination. However, he could be the next president of the United States and that, I thought, was cool.
The fundraiser was small–probably less than a hundred donors–and was held in one of those spacious homes up on Salt Lake Valley’s bench. The door knobs were probably worth more than my undergraduate education, and the chandelier might have funded law school. A stairway lifted out of the main room where the donors were gathered and the candidate climbed up a few steps to speak. Among other things, he said something that has stuck with me:
“This sure is a nice place,” he said, and donors chuckled at the understatement. “In fact, it’s part of why I am running for President. My opponent wants to take this away and spread out the wealth. I’m running because I think everyone in America should have a place like this. But you don’t get a place like this by taking it away from those who have earned it.”
Hyperbole or rhetoric, or both, fast forward now a few years, or more, and we find ourselves with a President who appears increasingly out of touch with the reality of what it takes to increase wealth, and that’s what it’s all about, right? Increasing wealth?
We’re not talking just about the level of unemployment, though that’s a great indicator. We’re talking about our national wealth–as a country and as individuals. Whether we are talking about how much debt the federal government is carrying or the average wealth of Americans, the high and lingering level of unemployment (anywhere between 12 and 23 million people, depending whether you include underemployed and those who have stopped looking, and whether you say it’s 8.3% or 8.254% unemployment) is a mark that our country is not growing.
In fact, economic growth was at only 1.5% from April to June. That’s abysmal. Even while the rest of the world is picking up, last year the US growth at only 1.7%, while China grew at 9.2% and India at 7.2%. Lest you blame it on cheap labor available to those developing countries, note that even Canada grew at 2.5% last year and Germany at 3.1%. If we’re going to turn the economy around, we’ve got to start growing again. Growth won’t happen by taking the fruits of success away from those who earned them.
TAXES OVER TIME
David Wessel, in the same article that cites Thorndike above, makes a few salient points: How much are the successful (‘wealthy” in President Obama’s parlance) paying in taxes now in comparison with past years?
- The top 5%, top 1% and top 0.1% of Americans have been getting a bigger slice of all the income and paying a growing share of federal taxes, and the corollary: the share of taxes paid by the bottom 40% of the population has been shrinking along with their share of income..
From Ronald Reagan to Barack Obama, the tax code has been tweaked and the economy has had its ups and downs, and the share of federal taxes paid by the top 5% and the top 1% has risen faster than their share of income:
In the 1980s, the top 5% averaged 22.6% of income and paid 28.5% of taxes.
In the 1990s, the top 5% averaged 25.3% of income and paid 34.3% of taxes
In the 2000s, the top 5% averaged 28.4% of the income and paid 40.3% of the taxes.
Do you see a pattern?
- Average tax rates have come down for everyone. On average, the tax bite on the rich is bigger—except for those whose income mainly comes from capital gains and dividends.
In 2011, according to the Tax Policy Center, about 46% of households didn’t pay any U.S. income taxes, a proportion swollen because so many have seen paychecks shrink or evaporate. But even in the better years of the mid-2000s, roughly 40% of households didn’t pay any federal income tax.
- The tax system narrows the gap between economic winners and losers, but not enough to stop the gap from widening.
Our tax system does provide a safety net to those who do not succeed, but not as much as the Obama campaign wants it to. Narrowing the gap is not enough, though; the Obama Presidency is aiming to eliminate it, not by lifting up the bottom, but by redistributing the property held by the top to those below them.
Unfortunately, we’re saddled with a President who is more concerned with a healthcare solution that will increase our taxes than an economic solution that will increase wealth so we can afford health care. It’s no unlike killing the golden goose to feed your family instead of just selling the golden eggs.
Golden eggs or rotten eggs, the question about fairness of taxes comes down to opinion resolvable only by a “show of hands.”
- Just Compensation (truthtofreedom.com)
- Obama On American Achievement: You’re Welcome (minx.cc)
- Obama: “If You’ve Been Successful, You Didn’t Get There On Your Own” (hotair.com)
- Don McNay: Why Mitt Romney Should Proudly Release His Tax Returns (huffingtonpost.com)
- CBO: By the way, the rich already pay more than a fair share in taxes (hotair.com)
- Conservatives dispute Obama’s ‘fair share’ claims, say top earners already pay enough (foxnews.com)
- Obama’s Tax Plan Irking Donors? (commentarymagazine.com)