Obama has loudly claimed that he will be raising taxes on the wealthy so they can pay their “fair shair” and he’ll lower taxes on the poorest Americans to help alleviate the “burden” they pay. Well, the WSJ has some outstanding analysis on the 2006 IRS data that was just released here. One of the myth’s that is completely shattered here is the myth that Bush’s tax cuts in some way benefitted the wealthy at expense of the poor. Liberals love to play with “funny math” and point to some ulterior motive that Bush really just wanted to reward his rich buddies by cutting taxes. However, the data shows that the 2003 tax cuts amounted to the largest increase in tax payments by the rich in American history. As the Journal points out “No President has ever plied more money from the rich then Geoge W. Bush did with his 2003 tax cuts.”
Here is just what some of the data shows:
- The top 1% of taxpayers (income over $388,806) paid 40% of all income taxes (highest share in 40 years)
- The top 10% (income over $108,904) paid 71% of all income taxes.
- Americans below the median income level paid a record low of 2.9% of all income taxes
- Americans above the median income level paid 97.1% of all income taxes
- The top 1% earned 22% of all reported income, but paid a share of taxes that is nearly double their share of income.
The WSJ also points out some other interesting nuggets from this data. They point out that the number of millionaires in America has doubled since 2003 from 180,000 to 354,000. As they state: “This is precisely what supply-siders predicted would happen with lower tax rates on capital gains, dividends and income. The economy and earnings would grow faster, which they did; investors would declare more capital gains and companies would pay out more dividends, which they did; the rich would invest less in tax shelters at lower tax rates, so their tax payments would rise, which did happen.”
Obama wants to raise taxes on the rich. One must wonder if this is because he truley wants to help the American economy or if he wants to engage in class war-fare to garner more votes from embittered poor voters. I’ll assume it is probably the latter, because “(i)f Mr. Obama does succeed in raising tax rates on the rich, we’d also wager that the rich share of tax payments would fall. The last time tax rates were as high as the Senator wants them — the Carter years — the rich paid only 19% of all income taxes, half of the 40% share they pay today. Why? Because they either worked less, earned less, or they found ways to shelter income from taxes so it was never reported to the IRS as income.”
This is how economics works folks. It is not a simple up and down as many suspect (this goes for the supply/demand paradigm too). Economics is often very complicated, but the math does not lie.
Technorati Tags: Taxes
July 21st, 2008 at 6:59 am
Interesting article, again it astounds me that no major candidate (outside of Paul & Huckabee) will embrace the national sales tax.
I guess it’s important to remember that the tax code is as primarily designed to appeal to special interest groups and party supporters rather than to provide the simplest or most economically advantageous way to fund the government.
July 21st, 2008 at 10:15 am
We need to redefine “rich”
Millionaires are a dime a dozen today
What that money buys you today against the tax bracket they put you in years ago is not what it used to be.
July 21st, 2008 at 10:57 am
71% on an income of $108,904? You might as well quit work. Especially if Obama is elected. You can make more money off the dole than working for a living.
July 21st, 2008 at 11:09 am
Actually, that figure means that those who make $108,904 and over pays for 71% of all income tax in this country. Although their total tax rate that they pay is probably in the 40% range.
July 21st, 2008 at 1:22 pm
You know what’s missing from this analysis is any mention of the growing income gap in the U.S. Yes, we’re growing the # of millionaires, and yes, those with higher incomes are paying an ever increasing portion of the tax revenue, but a large factor behind those changes is the fact that the gap between rich and poor continues to grow. A few data points:
1973 – 20% of households accounted for 44% of all income
2002 – 20% of households accounted for 50% of all income
In 2005 the Census bureau released data showing the richest 1% of households accounted for the largest share of overall income since 1928.
see:
money.cnn.com/2007/10/12/news/economy/income/index.htm
So it’s not surprising that as the income shifts to a smaller and smaller group of folks, the tax burden will shift as well.
July 21st, 2008 at 1:43 pm
“So it’s not surprising that as the income shifts to a smaller and smaller group of folks, the tax burden will shift as well.”
I dont see how that justifies anyone paying a larger percentage based on their income.
This kind of socialistic wealth redistribution is what kills a mans motivation and others effected by it. Why should I bust my ass to get somwhere so that once I reach a certain level I become a feeding trough for those who choose to go nowhere in life ?
July 21st, 2008 at 1:51 pm
I dont see how that justifies anyone paying a larger percentage based on their income.
I happen to agree with you, I don’t support income taxes period, instead I favor the national sales tax as a complete replacement for our current tax system.
BTW, John McCain in opposition to the Bush tax cuts in 2001:
“I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle class Americans who most need tax relief.”
McCain lied in a GOP debate, stating that he had opposed the tax cuts because they weren’t offset by spending cuts.
And of course, McCain flip-flopped and now supports the tax cuts after-all.
July 21st, 2008 at 3:25 pm
After two months, Bob finally makes a thoughtful point in #5, which really captures the difference between fiscal conservatives and fiscal socialists. In my view total aggregate wealth is what matters rather than the disparity between top and bottom, within a range. That range is growing which at extremes can lead to social unrest (the classic example being European feudalism). The other extreme is Obama-style Marxism in which the disparity is low but everyone gets screwed as in Cuba. But today the bottom have far more wealth than they had before, a morally desirable result desipte a growing differential.
So good point, and then poor Bob gets sidetracked again with silly talk, which just goes to show you that even a monkey can hit a bullseye given enough time.
July 21st, 2008 at 7:17 pm
BUT THE RICH HAVE NO PAYROLL TAX BUT THE RICH HAVE NO PAYROLL TAX [edited for spam]
Any complete analysis of who pays how much in this country must include the payroll tax. This is the little thing they always leave out when claiming that the rich really pay the most.
THEY DON’T!
July 21st, 2008 at 7:31 pm
yea they do
July 22nd, 2008 at 6:39 am
Its funny, no matter how much the real world disagrees with them, liberals always come up with some stupid mantra to conceal the reality around them. Just like the new mantra is “why don’t the oil companies drill on the land they already have.” That is such a dumb and irrelevant argument as to defy all logic.
Edward, if you want to make a rational post on here, you are welcome to, but please don’t ever do that again, that was just plain annoying.
In regards to the payroll tax, the fact is that you Democrats came up with this boondoggle to fund Medicare/Social Security with payroll taxes. IIRC payroll taxes are a flat tax on the first 80k of salary or so. So yes, the rich do pay payroll taxes, but it affects the poor disproportionately affects someone who makes around 50k then someone who makes around 300k, so in this sense it is regressive.
However, Brookings did an interesting study that refutes Edward’s and the liberal mantra of payroll taxes. When the payroll tax is included, the richest American’s pay 27.5% of the total tax burden, the top 20% of Americans pay for 72% of the total tax burden and the lowest 20% of Americans pay for 0.4% of the total tax credit. You see Edward, you forgot about one little thing . . . The Earned Income Tax Credit, and now you know the rest of the story.