Make the rich pay their “fair” share!

Another political narrative/canard that you can “set your watch to” (other than the gas “price-gouging” canard) is this notion that the so-called “rich” people (i.e., folks other than you and me) don’t pay their “fair” share of taxes.  In the current policy environment, one of the two major political parties wants to retain the Bush era tax rates for the “non-rich” (defined as  families earning less than $250,000 per year and individuals earning less than than $200,000 per year) and revert back to the Clinton-era tax rates for the “rich”.   Indeed, in a recent speech, President Obama noted that “…at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more.”

I am curious what President Obama’s source is for this statement. Clearly, the top marginal personal income tax rate is considerably lower now than it has been in the past; e.g., 50 years ago (when JFK was in office), the top marginal personal income tax rate was 91%, whereas today it stands at 35% (under Clinton, it was 39.6%).  However, just because the top marginal personal income tax rate is lower now than it was under previous Democratic administrations, this does not automatically translate into a lower tax “burden” per se (assuming that “burden” is defined as the actual dollar amount relative to income that people actually pay).  Indeed, my Baylor colleague Dave VanHoose pointed out a recently published Tax Foundation article entitled “No Country Leans on Upper-Income Households as Much as U.S.” which documents that the U.S. has by far and away the most progressive personal income tax system amongst 24 OECD countries.  Here’s a particularly important table from this article:

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Quoting from the Tax Foundation article, “…the top 10 percent of households in the U.S. pays 45.1 percent of all income taxes (both personal income and payroll taxes combined) in the country. Italy is the only other country in which the top 10 percent of households pays more than 40 percent of the income tax burden (42.2%). Meanwhile, the average tax burden for the top decile of households in OECD countries is 31.6 percent.”  Thus, in the U.S., the current policy is to have “…the wealthiest households in this country pay a share of the tax burden that is one-third greater than their share of the nation’s income.”  Furthermore, this share (see column 3 in the table above) is 24 percentage points higher than the average for the countries listed there.  Apparently the ante for “rich” Americans may be going up!

 

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