Fleischer also has some updated facts on how Bush's tax cuts affected government revenues. Paraphrasing his article:
by 2005 the bottom 60% of Americans made 25.8% of the income, yet paid only 0.6% of the income taxes and only 14.3% of all payroll taxes.If you divide the total taxes paid, 14.9%, by income, 25.8%, you get some sort of relative tax burden of 0.58. I'm going to call this figure Morgan's Relative Tax Burden, MRTB. Just to be clear, these taxes include the regressive Social Security tax.
For the "rich", the relevant numbers are that the top 10% pay 72.8% of all income taxes (I'll ignore payroll taxes for them, it would slightly increase their tax burden). What do they earn? The Tax Foundation provides this useful table, showing that the top 10% earn 47.3% of all the reported AGI. So their MRTB is 72.8%/47.3% = 1.54, slightly higher after payroll taxes. So the MRTB for the upper 10% of wage earners is nearly three times higher than that for the bottom 60%. Note that these table's figures are from 2006 and differ slightly from Ari Fleischer's figures, but the trend is very similar. Here is the MRTB for more of the upper classes of wage earners. This ignores payroll taxes, so the MRTB's are not exact, but it clearly shows that taxes in the USA are progressive. (Remember that the bottom 60% have a MRTB of 0.58, and sorry of there are extra big spaces in the table...)
| | Income | Income Taxes | MRTB |
| Top 1% | 22.06% | 39.89% | 1.8 |
| Top 5% | 36.66% | 60.14% | 1.64 |
| Top 10% | 47.43% | 70.79% | 1.49 |
| Top 25% | 68.16% | 86.27% | 1.27 |
I don't claim that these MRTBs are socially correct, subjectively fair, or best for the US economy. That is certainly open to debate. But it does show that the rich are objectively paying a fair share, with the top 1% paying over three times as much in MRTB as the bottom 60%, even including regressive payroll taxes.
In times of deficit, giving long term tax breaks to a majority of Americans is probably not wise fiscal policy. It is political pandering. To be fair to President Obama, G. W. Bush made the same mistake. I hope Obama is wiser.
2 comments:
Hi Morgan,
Your argument shows much less than you think it does, for two reasons:
Much of the US tax burden is social security tax, which is differently distributed than income tax. You pick what is arguably the closest thing the US has to a fair tax and argue that because that particular tax is fair, the entire US tax structure is fair.
Any assessment of the fairness of the US tax structure also has to assess what each class receives from the government. This is really not obvious - consider a simplified model in which taxes were only used to repay the one trillion spent on keeping banks afloat. If the well off benefit from keeping banks afloat much more than the middle class, this could be very unfair even if most of the funds came from well off taxpayers.
In short, tax fairness is a can of worms. My guess is that the UX tax structure is pretty favorable to the upper class, though its effect is unlikely to be uniform.
In any event, you need to consider a lot of issues neglected by this former Bush administration official:-).
Ray,
Ray - the numbers for the tax burden on the lower 60% DO INCLUDE the regressive Social Security ("payroll") tax. See the quoted section of the article - I'll add a highlight as well.
The numbers for the upper brackets do not include payroll tax, cause I couldn't find them. So the actual tax burden for the upper brackets would be slightly higher. In any case, I believe that the relative tax burden numbers are roughly correct.
Whether this is "fair" that the rich pay 3 times as much per dollar earned as the middle class is open to discussion, and Thom Hartmann echoes your arguments that since the rich benefit more from government, they should pay more. Just wanted to clarify my numbers.
Post a Comment