Las Vegas Review-Journal (Sunday)
The income tax and ‘fairness’
Almost half of households pay nothing
In a new “Politico Money” podcast, Senate Minority Leader Chuck Schumer, D-N.Y., says Democrats will refuse to work with the White House on taxes — or pretty much anything else — until President Donald Trump’s tax reform fails. In response, the president told Fox News that he likes Sen. Schumer, but “before he even knows the plan, he’ll say, ‘Oh, this is for the rich,’ so he doesn’t even know what the plan is, and he’s screaming it’s for the rich.”
The back-and-forth between Sen. Schumer and Mr. Trump is typical political demagoguery rooted in, as economist Walter E. Williams writes in The Daily Signal, the public’s ignorance about who really pays the most in taxes these days.
Sen. Schumer told Politico that if a compromise on taxes were to be reached, it would have to include tax hikes for the top 1 percent and deficit neutrality. Then and only then, he said, “a lot of Democrats would be willing to reduce the corporate rate.” But how much are the top 1 percent paying? And how much should they — and corporations — be paying?
As Mr. Williams notes, the latest IRS data shows that the top 1 percent of income earners — those who have an adjusted annual gross income of $480,930 or higher — pay roughly 39 percent of all federal income taxes. That works out to 892,000 Americans generating nearly 40 percent of all federal income tax revenue.
If you look at the top 10 percent of income earners — those with an AGI exceeding $138,031, the percentage is even higher. They contribute roughly 70.6 of the nation’s federal income tax take and make up less than 1 percent of the U.S. population.
On the flip side, as Mr. Williams points out, the bottom 50 percent — those who with an AGI of $39,275 or less — pay a mere 2.83 percent of federal income taxes. Thirty-seven million tax filers — or an estimated 45.5 percent of households — won’t be obligated to pay any income tax this year.
Sen. Schumer and others like to beat the “tax the rich” drum, but as Mr. Williams writes, earning $500,000 doesn’t make you super rich. Inflation, as well as other taxes Americans are subject to on top of federal income levies, continue to erode our collective buying power. And while Sen. Schumer may begrudgingly agree to a reduction in the corporate tax rate — among the world’s highest — actual American consumers and workers, not the corporations, will ultimately have to fork over those taxes in various forms.
Less than 1 percent of the American population generates 70.6 percent of our federal income tax revenue. Is that enough? Should they pay more? Do they pay their “fair share”? If not, what’s a “fair” number? How many Americans should be completely absolved from the responsibility of paying the federal income tax? And what incentive is there for those who pay no income taxes to have any interest at all in how Washington spends our tax dollars?