‘We Are Not Taxing the Very Wealthy Enough’: Runaway Inequality About to Get Worse
The United States' astronomical levels of economic inequality are poised to become further entrenched in the coming years.
A new report looks at all the taxes Americans pay, from income to property and sales taxes. Do the rich bear a heavier tax load? Yes, but just barely.
Turn on Fox News or listen to conservative talk radio and you won’t have to wait long until someone starts whining about how much of their incomes the rich have to pay in taxes — and how little, the lament coninues, that the poorest in our midst pay out.
All this whining would no doubt delight Teddy Roosevelt if this former President somehow suddenly reappeared among us. A century ago, Teddy and fellow reformers fought for steeply graduated tax rates. The higher the income, they believed, the higher the tax rate should go.
We call this principle “progressive taxation.” We have, today in the United States, precious little of it. Federal income tax rates do, to be sure, rise as income rises. But the tax code exempts one huge category of income — income from investments — from these rising rates. And many state and local tax levies — like sales taxes — subject rich and poor to the exact same tax.
Cheerleaders for our unequal status quo simply ignore all these regressive state and local taxes when they start whining about how much the rich have to pay in taxes. Researchers at Citizens for Tax Justice, on the other hand, ignore nothing in their just-released new report on who’s paying taxes in America.
The new CTJ research looks at all the taxes Americans pay. Federal and state income taxes. Federal payroll taxes for Social Security and Medicare. Federal excise taxes on things like gasoline. State and local property and sales taxes.[pullquote]If we had a progressive tax system, taxpayers at high income levels would pay more of their income in taxes than taxpayers at lower levels. [/pullquote]
The new CTJ report then breaks down taxpayers by income level and calculates the share of income each level pays in total federal, state, and local taxes.
If we had a significantly progressive tax system, taxpayers at the highest income levels would pay significantly more of their income than taxpayers at lower levels. They don’t. In fact, as billionaire investor Warren Buffett has been noting for the last few years, America’s super rich — like himself — pay less of their taxes in income than their receptionists.
Another recently released CTJ report backs up Buffett. A third of U.S. taxpayers making over $10 million a year, this report notes, get over half their income from investments — from tax-advantaged dividends and the capital gains that come trading stocks and other assets. These deca-millionaires will only pay 15.3 percent of their 2011 income in federal income and payroll taxes.
Meanwhile, those taxpayers who make between $60,000 and $65,000 a year get almost all their income from wages and salaries. These taxpayers will pay 21.3 percent of their 2011 incomes in federal income and payroll taxes.
Overall, counting all taxes, taxpayers in our top 1 percent will pay only 29 percent of 2011 income in local, state, and federal taxes. Taxpayers averaging $68,700 will pay almost exactly as much in taxes, 28.3 percent of their incomes.
Citizens for Tax Justice offers us still another tax progressivity yardstick. Our top 1 percent last year took in 21.0 percent of the nation’s total income. They paid 21.6 percent of the nation’s total taxes.
The rich, in short, have no cause to complain. They have squeezed, with their political might, all but 0.6 percent of tax progressivity out of taxation in America.
Teddy Roosevelt would be aghast. So should the rest of us.