The Forgotten 4%

In honor of tax week, I thought I’d repost this…it was one of my earliest posts, so please forgive all the exclamation points!!!!

All this talk about fairness and the “rich” paying their “fair share,” you’d think the lower classes were bearing the greatest burden of taxation but they are not, not by a long shot!  First of all, 49.5% of tax filers pay NO INCOME TAX WHATSOEVER–these of course are the lowest earners, not the highest earners!  For this reason, and others, the United States has one of the most progressive tax systems in the world and has the highest corporate tax rate in the world.

I do think the current tax system is unfair, but because only the top half of all earners pay anything at all! And what’s worse, it’s the top earners, not the wealthiest, who pay the vast majority of the taxes. The idle rich (not that there’s anything wrong with that!) and the government-connected rich (there IS something wrong with that!) aren’t necessarily the ones paying income tax. Income tax is paid by those who earn an income for labor. The richer you are the less you need to do this so per force the majority of the highest earners are still below the level of those rich enough not to have to work–this is primarily (and perhaps by definition) the upper middle class.

According to the chart below, the lower 95% of earners are paying the same in taxes as the top 1%–both groups pay roughly 40% of the taxes. That other 4%, what I am going to categorize as the upper middle class–doctors, lawyers, etc–pay 20% of the taxes. These are the people who racked up graduate school loans til they were 30, who pay top dollar to live near the city for shorter commutes to accommodate long work hours, who pay private school tuition for their kids and who are saving for their own retirements–all while paying close to if not more than 50% in federal, state and local income taxes alone! And of course everything they buy has taxes attached, as well as exorbitant property taxes which pay for the schools they don’t use.  Now THAT is unfair! (See more on this subject in general on my post on income inequality and my podcast of the same.)

blog20090729-chart1

And don’t let anyone fool you into thinking that raising taxes will solve any of our fiscal problems at all! The government will always spend more than it takes in so giving it more taxes will increase spending, no question about it. When will we stop feeding the beast and acknowledge the truth? It’s a spending problem!

This chart below shows that federal per capita spending in real dollars has grown from $3000 in 1950 to $17,000 today! The more surplus wealth we create, the more the government takes and grows.  And what’s worse, like I said on the show Saturday night, I’d rather burn the money than give it to the government because of the awful things they do with the money!  Taxes are lose-lose to this anarcho-capitalist!

Here are my three favorite websites about taxes:

The Tax Foundation

US Government Revenue

Tax Policy Center

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