FOD 2011.07.18

There's been a lot of blather emanating from the libs about how "the rich should pay their fair share." Conspicuously absent from their bleating, however, is a definition of just what exactly they consider fair. All we know for sure is that, in their rainbow-and-unicorn-filled world, 'fair' is more than they're paying now.

Let's stop for a minute and take a look at a few of those pesky little things called facts. As the following shows, (1) those whose income ranks in the top 5% of taxpayers pay proportionately more in taxes, and (2) the share of taxes paid by the top 5% is greater today under the current Bush tax rates than it was in 2000 under the higher Clinton tax rates.

If rich aren't paying their "fair share," then what's fair?

In 2008, the most recent year for which full data is available, the infamous top 1% – those earning over $380,354 – paid 38.02 percent of federal income taxes... Meanwhile, the bottom 50 percent of income earners – the group that, according to the liberal world view, is subsidizing tax handouts to the wealthy – shouldered just 2.7 percent of the federal income tax burden.

The top 1 percent ... earned 20 percent of the nation's adjusted gross income in 2008 – yet their share of the tax burden was nearly twice that (over 38%). Meanwhile, the bottom 50 percent earned 12.75 percent of the nation's income, while their share of the tax burden was about one-fifth of that. You can see this demonstrated in the chart below.

Another way of looking at this is the average tax rates paid by each income level. As you see below, it's much higher at the higher income levels.

Still, some might respond, surely the rich are now paying a smaller share under the Bush tax rates than they were back in the good old Clinton days? Actually, that's not true either. As you can see in the table below, the distribution of the tax burden across income levels was roughly similar in 2000 – the last year of the Clinton tax rates – than it was in 2008, after the Bush rates had been effect for years. In fact, the rich paid a slightly higher share in 2008.

But much of the current debate has focused on the need to raise marginal income tax rates on higher earners while keeping them the same for everybody else. The question is, though, if a society in which the top 1 percent already pay nearly 40 percent of the nation's income taxes (and when combined, the top 10 percent pay nearly 70 percent), then what would it take for liberals to be satisfied that the rich are paying their fair share? Should the top 10 percent pay 90 percent of the taxes? Should the bottom 50 percent pay zero income taxes? President Obama's vision to subsidize the ballooning social safety net by shifting even more of the tax burden on the wealthy – while increasing the percentage of people who are net takers in society – is simply unsustainable.

It is instructive to note that obama's proposal to raise taxes for families and small businesses that earn more than $250,000 a year ($200,000 for single filers) is estimated to increase tax revenue by only $709 billion over 10 years. That will do little to reduce estimated annual deficits in the neighborhood of $1.5 trillion over the same period. In numbers, obama's proposed tax hikes will reduce the annual deficit by less than 5%. So it is blatantly obvious that the underlying reason behind his proposal is to score political points and incite class warfare. No surprise there.

Moving now from the abstract to the concrete, let's take a look at what obama earned and what he paid in income taxes. Or as I like to say, practice what you preach, asshole.

President Barack Obama and his wife, Michelle, reported income of $1.728 million for last year... They paid federal taxes totaling $453,770 after receiving a $12,334 refund.

The Obamas paid their taxes at lowered Bush-era rates, even as he campaigns to end them for households with adjusted gross incomes above $250,000 – a category into which the first family clearly fits.

Note two things. First, the obamas paid their taxes at the lower Bush rates, while at the same time publicly yammering about how unfair those rates are and how they benefit only the priviledged few. Second, they received a $12K refund. Did they sign that back over to the Treasury? Of course not. They did what most of us would do and pocketed it. But at least we're not hypoctrical enough to loudly proclaim how unfair the tax rates are while at the same time quietly taking advantage of them.

Bottom line - obama is only concerned with getting reelected. If he were serious about solving the debt and deficit crisis he would be pushing spending cuts and tax reform. When the IRS code is thicker than War and Peace, and so complex that even IRS employees cannot answer questions about it consistently, not to mention the time and effort required to comply with it (a recent study suggests that a reduction in tax code complexity would help the U.S. reduce its national debt by as much as $1.4 trillion over a 10-year period), then it is painfully obvious that it's time for a change.

Perhaps to a truly Fair Tax...