For years, Democrats, and recently President Obama, have been pushing the rhetoric that the rich don’t pay enough in taxes and have called on them to pay their “fair share.” Successful investor Warren Buffet has said the same thing, recently writing in the New York Times that it was time for “shared sacrifice” from his fellow wealthy Americans. Sadly, their rhetoric couldn’t be further from the truth.
Pushing for his new millionaires tax, President Obama continued on this mantra when he discussed tax reform, saying, “Middle-class families shouldn’t pay higher taxes than millionaires and billionaires…Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett… It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.” The President and Mr. Buffett may sound reasonable. They seem to be promoting fairness. But sadly, their entire premise is a pure fallacy — one that is only promulgating myths about the rich and taxes while attempting to pit Americans of various different income levels against each other. Let’s break down the facts.
According to the Congressional Budget Office and IRS, the burden of federal taxation is already steeply progressive, despite what you may hear. Think about this: the top 1% or those who make more than $380,000 pay roughly 40% of all federal income taxes. The top 10% or those who make more than $114,000 pay more than 70% of all federal income taxes. The question that should be posed to the President and Democrats is this: how much more of a burden should the so-called “rich” have to pay? On the flipside, does President Obama believe that it is fair the bottom 50% of Americans pay less than 3% of federal income taxes?
More specifically, roughly 1 in 6 Americans live under the poverty level. This means more than 30% of those who make above the poverty line don’t pay any federal income tax either. I certainly wouldn’t call that shared sacrifice or fairness.
In response to the President’s millionaires tax proposal, both Investors Business Daily and the Associated Press fact-checked the President’s claims. Looking at the latest IRS data from 2008, IBD found those who earned $1 million paid an average income tax rate of 23.3%. People who earned between $100,000 and $200,000 paid 12.7% and those who earned between $30,000 and $50,000 paid 7.2% average income tax rate. The Associated Press used data compiled by the Tax Policy Center, a non-partisan think tank, and found similar predictions for this year.
Yet President Obama and Warren Buffet continue to make the false claim secretaries pay more in taxes than their wealthy bosses. They make it sound like the rich barely have any burden of taxation and are simply being greedy while they escape with paying less in taxes than middle class Americans. Yet, according to the IRS and as mentioned by Buffet in his own New York Times op-ed article, 237,000 households earned more than $1 million in 2009. But not surprisingly, Buffet fails to mention that, out of 237,000 millionaires, only 1,470 paid no federal income tax. Basic math finds that less than 1% escaped the high average tax rates.
So if these are the facts, what is the reason for the few cases the media always talk about that seem contrary to the data? The answer is simple. Again, according to the IRS, roughly 30% of those who earn more than a million dollars made their money from wages and salaries. Many wealthy people instead actually earn their income from investments such as stocks and dividends, which are not subject to the personal income tax rates as mentioned above and are first taxed at the corporate level.
When Warren Buffet said in his op-ed that his federal tax bill was only 17.4% while claiming his secretary paid more in federal taxes, he is simply comparing apples and oranges. Now, President Obama has decided to reform our tax system by raising taxes. What will likely become the “Romney Rule” will be nothing more than a scam to distract the American people from his clear policy failures. Such policies do nothing to create jobs or prosperity. Instead they are based on pure fallacies that incite class-warfare and aim to punish success to score political points. Americans must erase the repeated media images of greedy, rich Wall Street bankers and realize that any increase in taxes are regressive and take important capital away from the private sector that is already under siege from trillions in new regulations and mandates from President Obama’s policies. We need a new President who will unite Americans, grow our economy, and lead us towards a prosperous future.