Sunday, September 23, 2007
Ask the proverbial man or woman on the street if rich people should pay more taxes and the answer is a resounding yes. Ask almost any of the Democratic contenders for the presidency what this country needs most and you are likely to hear tax fairness, in the form of higher taxes for the wealthy. There seems to be almost universal agreement that one of the great ills of the United States is that wealthy people do not pay enough taxes. The facts, however, suggest that higher income people in the US are anything but under taxed. According to an Op/Ed piece in the April 2007 Wall Street Journal, the Congressional Budget Office (CBO) reports that in 2004, people making more than $43,000 (the upper 40%) pay 99.1% of all taxes. That, of course, means that the lower 60% of the American population pay under 1% of federal taxes. But there is more. The top 10% earners in the United States, those families making more than $87,300, pay almost 71% of all federal taxes. What makes this so remarkable is that in 1979 the top 10% paid only 48%. Heaven forbid that a person be in the top one percent of earners in this country; according to the same CBO report, their part of the total federal tax bill was 37%. Many will make the point that the rich make all the money, why shouldn't they pay all the taxes? The problem with that kind of attitude is that rich people become rich by knowing the score and putting their money where it is treated the best. One of the reasons Francois Sarkozy won the French presidency was the shocking revelation to the citizens of France that many of their wealthiest and most prominent families were moving to Belgium to avoid the high taxes in France. Soaking the rich can not go on indefinitely. It has its costs. The wealthy can vote with their feet. Corporate Taxes are another huge problems in the US. The motto of many in this country is "Let's squeeze the big corporations." They make their money here, they should pay their fair share. Well, my friends, it may surprise you to learn that at 38% the US has the highest corporate income tax in the developed world. Canada just lowered their corporate tax rate this week to approximately 31%. Germany, Britain, Spain and France (yes France) have all cut corporate income taxes in recent years and none of these countries now taxes corporations at a rate of greater than 30%. The author of the Op/Ed piece, Ari Fleischer, makes the following statement: Our tax system comes up short in a lot of ways: It doesn't foster economic growth. It isn't simple. And it certainly isn't fair. The one place it does excel is at redistributing income. Soaking the rich is not solely a strategy of the Democrats. The present system has been largely brought to us by Republicans. The current tax systems is a recipe for disaster. Too many people in this country are paying virtually no federal income tax, thereby pushing their rightful burden off on to the fat cat down the street. The problem is if the economy in this country were to slow quickly, the income for the top 1% would also slow sharply and the current budget deficit would become a budget chasm. The country needs to simplify taxes and make sure that everybody pays to keep the country's light on. Most importantly, we need to regain our historical position as the low-tax country in the world. Low taxes encourage people to take chances, because when they win they get to keep most of the winnings. Ronald Reagan knew that and his tax cuts in the early 80s put our country on a growth path that is the envy of the world. But Ronald Reagan spoke incessantly of requiring everyone to climb down off the wagon and help pull it. Former President Reagan is surely turning in his grave at today's situation, when only 40% of Americans are on the ground pulling the wagon, while the other 60% get a free ride.