Just because the rich can afford to pay more in taxes doesn’t mean they aren’t paying their fair share.
While some call for a more progressive tax code in which the rich “pay their fair share” in taxes, it is almost always left unclear exactly what is meant by “fair share.” Is it fair to ask the top one percent of income earners, who earned 15 percent of wealth in 2011, to pay at least 15 percent of the taxes? They actually paid 24 percent of all federal taxes, with an average federal tax rate of 29 percent.
In contrast, the average federal tax rate for the bottom fifth of income earners is only two percent and they paid less than one percent of federal taxes in 2011, the last year for which data is available from the Congressional Budget Office.
Liberals say that rising inequality is reason enough to raise taxes on the rich. They typically neglect to mention that more income for the wealthy means they carry a greater burden of federal taxation.
The highest fifth of income earners are the only segment of Americans who pay a greater share of federal taxes than their share of income. This group represents 24 million households with at least $110,000 of income for a two-person household.
The top 10 percent of income earners pay more in taxes than everyone else combined. That’s 12 million households, that earn at least $150,700, who pay more in federal taxes than the other 109 million households.
Depending on how you measure tax progressivity, it could be argued that taxes are more progressive today than in 1979, during the Carter administration. As of 2011, the top one percent paid almost 10 percentage points more of the federal share in taxation than they did in 1979. The top fifth of income earners paid more than 13 percentage points more than they did in 1979. This is in spite of the top marginal tax rate falling from 70 percent in 1979 to 39.6 percent.
The tax code should be written to raise revenue for limited government functions — not to make a social statement.
However, even if one believes that income inequality should be addressed through the tax code, to argue the rich don’t pay their fair share of taxes is absurd.
