Wednesday, December 4, 2002

In matters of taxation, what is really fair?

By CAL BEVERLY
editor@thecitizennews.com

If you made more than $52,965 in 1999, thank you.

Why? Because you are part of a group that paid $83.50 of every $100 in individual income taxes collected by the U.S. government.

Are you shocked? There's more.

If you're in the group above, you are in the top 25 percent in adjusted gross incomes of all U.S. taxpayers. There were 31.5 million tax returns in that category in 1999, the most recent year available from the Internal Revenue Service for these kinds of analyses. Remember that many of those returns reflect husband-and-wife households filing jointly.

Now in case the Democrats haven't figured out the implications yet, here it is spelled out: The remaining 75 percent three out of every four of all taxpayers contributed less than $14 TOTAL out of every $100 taken in by the IRS.

It gets worse.

"By 1999, the bottom half of the income spectrum was paying just 4 percent of the income tax," according to a startling new report by the Washington, D.C.-based Tax Foundation.

That's not a misprint. The lower 50 percent of income earners combined pays less than a nickel out of every tax dollar collected.

Here's another way to state it: By 1999, 96 percent of all personal income taxes paid to the IRS came from taxpayers whose household income was above $26,415. And how many taxpayers were below that threshold? Half.

That lower half, by the way, earned 13.3 percent of all AGI, but paid only 4 percent of all individual income taxes. Is that "fair"?

Now, how about that infamous "wealthiest 1 percent" of taxpayers so reviled by Democrats? Turns out that robber baron group earned $19.50 of every $100 reported as adjusted gross income. But here's the kicker: That much-maligned group paid $36.20 of every $100 in taxes collected.

Let's see: That evil group earned 20 percent of the money but paid 36 percent of the taxes? Hmmmmm, is that the Democrat notion of "fairness"?

One supposes with some justification from past Democrat administrations (Did you know that for a spell within the past 60 years, the top income tax withholding rate was over 90 percent?!) that "fairness" in the Democrat sense would be attained only if that 1-percent group paid ALL of the taxes.

As one who was poor but was appalled anyway at such confiscatory tax rates, I can tell you that, given their head, Democrats have jacked withholding rates to unbelievable levels in the past.

It's like that famous tale of the non-swimming scorpion stinging to death its turtle ride across a river: It's just in their nature to soak the rich. And rich to a Democrat seems to be anybody making six or seven bucks an hour above minimum wage.

Let's go to the 5 percent level. If you or your household made more than $120,000 in AGI, your group earned more than 34 percent of the total AGI, but your group paid 55.5 percent of all taxes collected. Is that "fair"?

How about the top 10 percent? That would mean you filed a return showing AGI of at least $87,682. If you are in that rarefied group of "rich" people, you earned 44.9 percent of total AGI, but you paid 66.5 percent of all income taxes in 1999. Is that "fair"?

The trend is not favorable for those paying most of the taxes. For example, 10 years earlier, the top 50 percent of taxpayers earned 85 percent of total AGI, but paid 94.2 percent of all taxes. By 1999, those figures had increased to 86.7 percent and 96 percent, respectively. But the increasing burden is even more targeted than those figures suggest.

"The only segment of the income spectrum paying a steadily higher fraction of individual income tax collections is the top 5 percent of filers," the report says.

To put it simply, fewer and fewer people are paying more and more of all taxes. Those who pay little in taxes to begin with can look forward to paying even less as a percentage of the whole. The share of income taxes paid by the bottom 50 percent has decreased from around 7 percent of the total in 1980 to less than 4 percent in 1999. Is that "fairness" in action?

Remember that the above figures represent only those taxpayers who actually paid taxes. There is a whole segment of lower-income earners who receive "earned income credit," essentially a pass on paying income taxes. They pay withholding taxes but get most or all of it back when they file a return.

Let's talk about "fair."

Democrats at the national level talk about "fairness," but what that translates into might seem anything but "fair" to most people.

Why is it "fair" to tax a person making $87,000 a year at a much heavier rate than someone making $27,000 a year? Because the 87K person "can afford it better"?

Let's look at it another way. The 27K person gets the same level of government services for which taxes are paid in the first place as the 87K person, but is paying much less for the same services. If it's "fair" to the 27K person, is it correspondingly "unfair" to the 87K person?

Let's suppose two of us were standing in line at the Demo-mart store. Each of us bought identical coats. You are ahead of me and the clerk asks for your IRS withholding statement. Seeing that you make $87,000 a year, the clerk charges you $30 for the coat.

My turn now. The clerk sees that I make $27,000 a year, so the clerk charges me $10 for the same coat, one-third of what you just paid. You are standing there with your mouth open. I don't blame you.

"Why did you charge me three times what you charged this guy for the exact same coat?" you demand of the clerk.

"Because this guy makes a lot less money than you do," the clerk explains.

"Wait a minute," you say. "Didn't each coat cost Demo-mart the same price? Didn't the same amount of labor, the same amount of materials, the same level of workmanship, go into each coat?"

"Well, of course," the clerk replies. "But that's not the point. It's just not fair for this guy to pay the same price as you pay. You both need coats, but you can afford it. He can't."

Do you suppose such a private sector store would stay in business for very long?

But, Democrats would have you believe that government services are different from that coat. And they would have you believe, that in matters of government and taxation, the clerk is just being "fair."

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