The further to the left or the right you move, the more your lens on life distorts.

Monday, July 21, 2008

A Taxing Situation

Barack Obama has already stated that he’ll raise tax rates on “the rich” so that they pay “their fair share.” This position is an article of faith among those on the Left and is shared wholeheartly by Congressman Charles Rangel, the Democratic chairman of the House Ways and Means Committee—the place where new tax law emanates. IRS data over the past 18 years indicates that there is an inverse correlation between tax rates and government income—that is, the lower the tax rate the more the government collects in tax revenue. It appears that fewer people implement tax avoidance schemes when rates are low and economic activity is stimulated when people have more money in their own pocket. But no matter, taxes are on their way up—all in the interest of fairness.

The Wall Street Journal reports data that are worth noting:
… the top 1% of taxpayers, those who earn above $388,806, paid 40% of all income taxes in 2006, the highest share in at least 40 years. The top 10% in income, those earning more than $108,904, paid 71%. Barack Obama says he's going to cut taxes for those at the bottom, but that's also going to be a challenge because Americans with an income below the median paid a record low 2.9% of all income taxes, while the top 50% paid 97.1%. Perhaps he thinks half the country should pay all the taxes to support the other half.

The counter-argument that is voiced by those on the Left is that the “rich” earn a substantial portion of earned income. In fact, the top 1 percent earned 22 percent of income. But according to IRS data, they paid almost double that percentage in taxes. It’s also worth noting that the vast majority of the “rich” are not trust fund kids. They come from middle class families and built their own wealth the old fashioned way—they earned it through hard work.

The WSJ comments:
The idea that this [lower tax rates] has been a giveaway to the rich is a figment of the left's imagination. Taxes paid by millionaire households more than doubled to $274 billion in 2006 from $136 billion in 2003. No President has ever plied more money from the rich than George W. Bush did with his 2003 tax cuts. These tax payments from the rich explain the very rapid reduction in the budget deficit to 1.9% of GDP in 2006 from 3.5% in 2003.

But no matter. The MSM and the Democratic party regularly reinforce the meme that the rich don’t pay their fair share. I wonder, what would that fair share be? Maybe the top 10 percent should pay, what, 90 percent of all taxes? Why not 95 or 100 percent? Since paying 7 of every 10 dollars collected in federal taxes isn’t fair, someone should ask Barack Obama what number he thinks is fair. I wonder how he’d answer.