Do the rich pay their fair share in taxes?
The tax laws in this country have been skewed towards protecting the rich for a long time. Since George W. Bush decided rich people needed tax cuts, the balance has tilted even further in their favor. The people who rant and rave about rich people having to pay punitive levels of taxes are, almost without exception, high earners. Some of them have claimed we should have a flat tax, with everybody paying the same rate. That would work out very well for them. A tax on all income of about 20% would bring in about the same revenue as the current progressive schedule. It would have to be a tax on all income, however, with even those who have very low incomes paying 20%. What would that mean to less wealthy people?
Take a person with a family of four earning $20,000 a year. No deductions for family members, just a flat tax of 20%. This person would pay $4,000 in taxes, leaving only $16,000 to support the family. A person with an income of one million dollars would pay $200,000 in taxes, leaving only $800,000 to support the family. Only $800,000? Some people do indeed think it is an unfair burden on the very wealthy to expect them to pay a lot in taxes. Some go so far as to say that income above a certain level should not be taxed at all. They contend that rich people build businesses which hire people and therefore benefit the entire economy. Supposedly, the French champagne and Italian shoes these people buy are a great boost to the American economy.
Those who contend the rich are taxed too heavily fall into one of three groups; those who are rich, those who think they are rich, and those who think they will become rich in the near future. A recent study indicated that many Americans have trouble with basic math. The study showed that 19% of Americans believe they are in the top 1% in terms of income. Another 20% believe they will be in the top 1% within a few years. That is 39% of Americans that believe they are or soon will be in the top 1%. All of these people apparently believe that they will face a big tax increase if taxes are raised on the wealthiest 1%. To be in the top 1% of wage earners in this country requires an income in excess of $330,000 a year. Nobody making $200,000 a year is anywhere near the top 1%.
To create a more effective tax structure that will allow the rich to remain rich and allow those who just think they are or will be rich to avoid a significant increase in taxes, how about a tax rate of 70% on any income over one million dollars? This would provide a great deal of much-needed revenue that would take a bite out of the federal deficit. It might cause a slump in sales of private jets but no family farm would face foreclosure because of it. Nobody struggling to raise a family on $22,000 a year would feel the pinch.
It will not happen. Campaign donors and corporations would not allow such a thing. Many of the wealthiest people in this country made their money the old-fashioned way—they inherited it—and in their minds they are entitled to remain wealthy even if they contribute nothing of value to the country or its citizens.