Just what is their fair share, anyway?

Published on April 18, 2011 by

We often hear liberals say that the rich aren’t paying their fair share of taxes.  As I pointed out in my post on Friday, the top 5% of taxpayers pay 59% of federal income taxes.  That’s apparently not good enough for liberals.  So I’d like to find out what the limit is.  Considering that the top 5% earn 35% of the total taxable income, at what percentage would their share of total taxes paid be so high that even liberals would consider it unfair? [UPDATE: Just to clarify, I do not mean to say that all liberals agree that the rich are not paying their fair share of taxes. But it is an argument that has been made by some prominent liberals.]

Please answer the poll below. (For simplicity’s sake, I’ll presume that anyone who votes that the current share is too low to be more on the liberal side of the question, and those who vote that the current share is too high to be on the conservative side.)

(Those viewing this on LiveJournal, please go to my site to vote.)

Paying what share of all income taxes would be unfair to the top 5%?

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30 comments on “Just what is their fair share, anyway?”

  1. Dan L says:

    I had to guess what i am paying to decide what i think they should pay. To be blunt, i feel it should be a flat percent that we all pay regardless of income. That would be fair would it not? But it seems that both sides of the argument don\’t find that fair. That is what i don\’t understand.

    I also can help but question if the top 1% really makes up that much. Considering how many of the top 1% are on the IRS lists for tax evasion, i suspect that they really make up a lower percentage than they are given credit for.

  2. David Klecha says:

    I’ll cop to the 75% vote for two reasons.

    One is that the “taxable income” comparison is… a little misleading, I think. Practically by definition, higher earners have greater resources and greater incentive for minimizing their taxable income. If we compared gross income or, better yet, net worth to tax burden, the numbers would be a lot closer together.

    And, second and related, is that they have greater resources and abilities to live a comfortable life and enjoy the fruits of their wealth while still shouldering a larger tax burden than the other 95%.

    The income disparity in this country has done nothing but grow, and it seems only fair that the tax burden should grow to keep pace with those who have seen the greatest income growth.

  3. Heidi says:

    We make precisely the average national income, so we\’re neither living \”on the dole\” or rolling in money, but hubs always laughs and laughs and laughs when people accuse \”the rich\” of getting huge tax breaks. The people who make this complaint generally MADE A PROFIT on our tax system. He always wants to ask them who, exactly, is getting the huge tax breaks.

    I wonder if it\’s more about envy than anything else. I wonder if people who make this complaint really have a specific ratio or number in mind, or if they simply want to have better lives or at least not have to watch others having such extravagant lives. Maybe forcibly redistributing income under the name of \”fair share\” is the best way they can think of to do this.

  4. Heidi says:

    As an aside, you always start interesting conversations on this blog, and if you had a “subscribe to comments” option, it’d be convenient for your readers to follow along with those conversations.

  5. Daniel says:

    At our house, I’ve taught my kids that “fair” is the “f-word.” It’s the embodiment of hubris–a shorthand way of saying “I feel this way and the absolute, objective universe supports me.” (This is opposed to “just”, which is usually used in the context of existing, clearly-defined morals or laws.)

    I’m fine with progressive taxes if government is properly scoped to the defense of liberty and property (thus bringing more value to the wealthy). As entitlements grow, taxes become immoral takings, and no amount is “fair.”

  6. I wonder if we will every move to the only truly \’fair\’ (inasmuch as a government-run institution can BE fair) revenue-raising system for the govt. That would be sales tax. Increase sales tax and abolish income tax.

    Seriously, whoever thought income tax was a good idea was wrong.

    Sales tax where state and federal govts duke it out to get their portion is much better. Think about it: Wealthy folks have plenty of money and spend it, often on more and higher-priced items. Thus their sales tax is higher.

    Done.

    Next crisis please.

  7. Could you post a link to your source for those numbers? I\’m just asking because, I\’ve always understood there to be a pretty big gap between what the welathiest American\’s are expected to pay and what they actually do pay. For example, I found a site here that had numbers pretty close to yours: http://www.financialsamurai.com/2011/04/12/how-much-money-do-the-top-income-earners-make-percent/

    It suggests that the top 5% effectively pay 43% of taxes, not 59%.

    The numbers are also misleading in that they don\’t reflect the actual percentage of income the rich pay. The top tax bracket is (I believe) 35% right now, the lowest 15%. Although I\’ve always been given to believe that there are plenty of loopholes for those with money to hire people to find them. :)

    All of which means I would be in favor of a far more straight forward tax system, so that we could more easily have an intelligent conversation about who should pay what. Instead, we first have to try to figure out who is actually paying what. :)

  8. Christine, I don’t know where you’re getting that 43% number, but it’s not at the site you linked to, which says the top 5% pay 58.72% of the taxes while earning 34.73% of the total Adjusted Gross Income. Those numbers are the same as mine, except that I rounded to the nearest percentage point.

  9. Nope, you’re right, I was reading that wrong. I’ll take a look at your numbers and think some more. Thanks.

  10. I’m not going to vote in this poll because I’ve never said that it was fair. You’ve cast a meaningless question to me, that appears designed to make those who are liberal/progressive/whatever look bad.

    The question of taxes has nothing to do with fair. It has to do with the very SF concept of paying-it-forward. I’ve always, always believed that those more fortunate should help those who are less fortunate.

    Is it fair that I’m paying taxes on a war I don’t want, or on sending other people’s children to school?No. But I can afford it and if it makes the society I live in better then that’s part of my civic duty. And truly, I think paying it forward is part of my Christian duty.

    Is it ever going to be comfortable or make me happy? No. It doesn’t matter what the income bracket is or where one stands in it; no one likes to pay taxes.

    Can the wealthiest 5% afford to pay a larger percent of their income than I do? Yes, they can. Can I afford to pay more than other people? Yes, I can. Is that fair? No.

    Fair has nothing to do with it.

  11. Ardis says:

    You ask the wrong question. Your question is framed as though taxation should be based on a one man/one dollar rule. What proportion of this country\’s wealth do those 5% control, or earn annually? That\’s what some people (presumably the ones you label as \”the liberals\”) think is a more equitable figure for the share of tax due.

  12. Jayce^ says:

    In all reality we shouldn\’t even have /income/ tax (didn\’t exist until the 1918 lame duck congress changed the constitution to allow it). There are very good reasons it was prohibited before that.

    Now, given that we have one, it should just plain be a flat tax. Why create a class-warfare based on wealth. \”fair\” is equality, and you percentages are equal.

    if you think somebody should pay more, then tax on the usage (sales tax, gas tax, etc). Pay as you go, tax funds the source of the revenue.

  13. Agreed, Mary.

    Partly, I think, is in defining “fair.” This seems to be the standard basis for an argument for flat taxes, but flat taxes aren’t fair. In fact, even in a flat tax system, the wealthiest will be paying a higher percentage of the taxes than they earn. Why? Because I’ve never heard a rational flat-tax argument that didn’t, at the very least, allow people to subtract the first $x,000 of income. So a person making $10,000 a year still wouldn’t pay taxes, and someone is going to have to compensate for that. So in a flat tax system, that gets spread around between the wealthy and middle class. Well, that already happens, except in the flat tax system, the middle class will have to take on more of the burden.

    So back to “fair”: Is it fair that if I earn $50,000 a year, I pay $10,000 in taxes, while someone earning $500,000 a year pays $100,000? 10k to a middle-class family is going to be a lot more valuable, just in terms of basic necessities, than 100k is to a wealthy family. The cost of food is getting higher and higher each year, and while some wonder why Americans are getting fatter and fatter, I can’t help but notice that eating well costs me a ton of money ever week. If I had to pay more taxes, I might not be able to do that. If someone earning half a million dollars a year has higher taxes, they may not be able to buy a bigger house.

  14. I\’m a liberal Democrat who has been wishing the Democrats would grow a backbone for a while now and raise taxes across the board. And maybe close some of the loopholes while we\’re at it. I know that Orin Hatch has proposed a solution for this: anyone who wants to pay more can write a check, but let\’s be realistic, that is voluntary whereas, taxes are an obligation.

    There was a time when Americans, Democrats or Republicans, had the convictions to make sacrifices, and politicians would live up to that. Now it seems that all politicians, Democrats or Republicans, think of reelection first and it\’s hard to raise taxes with reelection on your mind. Only the most courageous would do it and I don\’t see a lot of courage on either side right now.

  15. Mary: You equate taxes with the concept of ‘paying it forward’ and then equate ‘paying it forward’ with your Christian duty. Are you advocating that the government enforce your Christian values?

    When taxes are how we get other people to ‘pay it forward’ the practical application by the goverment is simply, “Pay it forward or we will imprison or kill you.” Not something I’ve ever really associated with Christian values. As a Christian I have to oppose the idea on principle.

    ***

    Incidentally I believe fully in the ‘pay it forward’ concept and I regularly put my money where my mouth is though I am by no means well off. As for graduated taxes, the legal rights and privileges springing from our government for a rich man are exactly the same as for a poor man. Why should the rich man be forced to pay more for them? I don’t think he should be.

    Further, I oppose raising taxes at this time because I believe a great deal of what the government currently pays for is unnecessary and in many cases outright undesirable for the health of our nation as a whole. We should be willing to make the sacrifices necessary to curtail government spending by a great deal, not insisting that our fellow citizens make sacrifices so that we can hold them up for more cash.

  16. Mary, maybe you specifically have not said anything about the rich not paying their fair share, but if, as you say, “The question of taxes has nothing to do with fair,” perhaps you need to let other people on your side of the political spectrum know that.

    Just one example:
    http://blog.aflcio.org/2011/03/16/bill-would-ensure-very-wealthy-pay-fair-share-of-taxes/

  17. Megan says:

    As far as \”paying it forward\” statistically, conservatives voluntarily give more than liberals. Sorry. Here\’s an article with compiled data in the NYT:

    http://www.nytimes.com/2008/12/21/opinion/21kristof.html?_r=3

    My family is pretty poor, but we still regularly volunteer our time and resources to the community. The nice thing about this is that I actually know where my time/energy is going.

    I personally hate the idea that people are punished for succeeding. If I ever became rich, I\’d rather donate my money to something I believe in — like scholarships, Heifer International, microfinance, etc.

  18. Ethan: That’s an amazing and really hyperbolic leap of unrelated dots. Particularly since, the last I checked, there’s no death penalty for failure to pay taxes. “Paying it forward” and the fact that I feel it is my duty to care for those less fortunate are two unrelated things. Christianity is a very, very broad spectrum. Clearly you and I are in different camps.

    Eric: I don’t think it’s “fair” for you to choose who is in my political spectrum. I think that the word “fair” is, at best, inaccurate one for what we are talking about.

  19. Or we could throw this wrench into the conversation: How do we decide who gets to be rich, and who gets to be poor, and is that entirely fair?

    Distribution of wealth is something that we as a community decide, whether we choose to do it through capitalism, socialism, communism, or something else. We’ve set in place a represeantative government to make those decisions — and most of those representatives are welathy.

    So why do we think the weatlhiest Americans need protection? They’ve always been able to take care of themselves, and make laws protecting their own wealth.

  20. David Klecha says:

    @Megan I support taxation as a reasonable means of “payng it forward” because the government (in theory a mere agent of the people) has the reach and authority to pay it forward much more comprehensively and systematically than any given aggregate of private citizens. When voting with their own wallets, people are much more likely to be prone to particular blind spots than if they are voting for a policy initiative that pools their combined contributions. (A non-contentious example might be that urban contributors are not as aware of the need for rural electrification, but without a national contribution pool, the rural poor don’t have the resources to fund such an effort, in whatever aggregate.)

    Not to mention that the scope of things that we’re capable of funding through taxation far exceeds what we might have the time or attention to give to, in whatever amount, individually. How much would you give to NASA? NIH? EPA? Do you think you could convince enough people to do the same to make a material difference, if those things were to have their funding cut due to a lack of tax revenue? As much as I do like to give to particular charities and such, I also like that I am able to help enrich and nourish the lives of my fellow citizens through tax dollars.

  21. Mary:
    “There’s no death penalty for failure to pay taxes.” I didn’t say there was. But the threat of force, deadly force, is how the government imposes its will on those who fail to obey its laws, in this case failure to pay taxes or to allow themselves to be imprisoned for same. Everything the government does is backed by the threat of violence. Resistance against the government ultimately leads to violence and deadly force. It’s an uncomfortable fact that I’m willing to leave out of this discussion for the discussion’s sake.

    So we’re left with ‘mere’ imprisonment. Enforcing Christian ideals through threat of imprisonment is not Christian in my book and not something I can support.

    You said, “Paying it forward” and the fact that I feel it is my duty to care for those less fortunate are two unrelated things.”

    Yet you related them. I won’t quote your post, it’s just up the page, but your second paragraph pretty clearly equated taxes with ‘paying it forward’ and your third equated paying it forward with your Christian duty. I agree that ‘paying it forward’ is a Christian duty. I just don’t think the government should be in the business of forcing its citizens to live their Christian duty. You and I and everybody else are perfectly capable of doing that, or not, on our own.

    To be clear, I’m not suggesting we should abolish all taxes or laws. Nothing of the kind. We give up some freedoms in order to live in a secure prosperous society, banding together against the predators as it were. The government activities I’m fine with being forced to pay for relate to those things, the common defense, roads, police, etc… Most other things I’d prefer to be given the choice on. There is no philisophical leap at all between the government forcing its citizens to ‘pay-it-forward’ and the government forcing its citizens to attend sunday meetings. The only difference is what’s popularly acceptable now and what’s not.

    David:
    I simply don’t agree that the government is either more comprehensive or more systematic than private charities would be. To my eye the evidence that the government is exactly the opposite, and crushingly inefficient to boot, is overwhelming.

    As for whether things like NASA and the EPA would get funded if it were left up to people to volunteer? I think they absolutely would. I would certainly contribute to both if they were actually beholden to me for my goodwill. I also think that they would not be the bureaucratic sinkholes that they are today if they had to rely on voluntary contributions.

    The government could even turn the might of its tax apparatus into a means to collect and distribute voluntary contributions to anything and everything it has an interest in. That would alleviate the problem inherent in the obscure cause and keep things civil at the same time.

  22. Megan says:

    I really do like NASA…but I don’t think we need it. NASA’s budget is currently a joke, spending billions more than necessary because, by law, various parts must be built in various constituencies to please the politicians who vote on the budget. Projects are also often cancelled part-way when a new president steps in.

    Meanwhile, companies like Space X and Orbital Sciences (private, for-profit companies) are making breakthroughs because their budgets aren’t always being cancelled and re-arranged. Space X recently announced that one of its rockets will be able to lift payloads for $1000/lb — something of a mythical number in the space industry.

    The government has more reach, but it’s also often grossly inefficient. I think there are some things that require reach, some things that the government does well (roads jump to mind), but NASA in its current state is a great example of a program that should be able to do much, much more with how much money’s poured into it, and is constantly crippled by bureaucracy.

  23. David Klecha says:

    @Ethan Unfortunately, your personal willingness to give, and give comprehensively, does not translate into a meaningful reassurance that enough people would feel the same way that the needs of this country would be adequately addressed by the haves. I’d propose, in fact, that for your premise to be sound that we should have a marked reduction in poverty, hunger, and so on as the fortunes of those at the top grow. But… they haven’t. The problems are still there and there’s little indication that people are investing their money in the direction of greatest need. I’m sorry, but there isn’t. As usual, I would love to see some evidence to the contrary.

    More to the point, something like the EPA exists to provide enforcement, not just a basic service. How effective is it going to be if it is directly dependent on funding from business owners and corporations at policing them? Point of fact, I would rather that something like that was shielded by a trenchant bureaucracy and obtuse political process, rather than have its funding wiped out by a weekend of attack ads on Fox News.

    @Megan NASA v. commercial spaceflight is not an either/or proposition, and probably a discussion for another day. Suffice it to say from my perspective that while the commercial spaceflight industry is good for limited innovation and reducing costs on proven technology, they’re unlikely to take part in awesome science for the sake of it. Privatization is not the end-all be-all of models for aggregate behavior and, in fact, I think it’s a really bad idea for the sorts of things that are high risk and low (near term) reward.

  24. Ethan Skarstedt says:

    David: Your point is sound, our opinions differ. The income gap is definitely getting worse. My only response is to point out that the government has been doling out the have’s money to the have-nots for several generations now on an ever increasing scale and, as you pointed out, the trends are going the wrong direction. Why should more of the same suddenly start working? I honestly think getting the government out of welfare programs would bring about better results for those currently served by them and solutions rather than endless perpetuation. I’m sure our opinion here differs.

    As for the EPA being dependent on the very businesses and corporations it’s likely to be enforcing against, again, a sound point. I am by no means against all compulsory taxation. A case could even be made for organizations like NASA and the NIH to be on the ‘pay for it or we’ll imprison you’ list, especially if their doing truly long-term research. And again, my only response is that as great as the work those two organizations do is, they (and all their kin) are massively hidebound wasteful bureaucracies right now and getting worse every year. More of the same will not reverse the trend.

    Leaving more of the money in the hands of private investors will make private investors more, not less, likely to take truly long-term risks. When the government is ever more ravenous the ‘get it while the getting is good’ mentality of our current quarter to quarter business culture is only reinforced.

    As for attack ads on Fox News wiping out the funding for voluntary government programs? So be it. Just because your neighbor is stupid doesn’t mean you get to force him to paint his house or feed the homeless at the point of a gun. Putting a layer of government bureaucracy between you and your neighbor doesn’t change the nature of the action or make it right in my opinion. And besides, I don’t think my neighbors are all that stupid.

  25. David Klecha says:

    @Ethan: For starters, I would rather work with the mechanism we have, than blow it up and simply hope that the money flows to the right places on its own. It’s possible to make an existing process more efficient and more targeted–if conservative political elements were working with this goal in mind, rather than simply trying to lay waste to it entirely, I have every confidence that it could get done. But in the absence of the mechanism, there are no guarantees–and the failure state of such a hope-based initiative is not just unpainted houses but starving people.

    Look, an elimination (or dramatic reduction) of taxation is not going to magic up high-paying jobs and affordable education. I’m guessing quite the opposite. Despite the fact that the richest 5% keep getting richer with respect to the rest of the population, their money has done little but stay in their own hands. Despite the fact that their money is more than enough to let them live in perfect comfort for the rest of their lives, they keep piling more and more on. In 2007, the top 400 families reported $187 billion in income, as opposed to $18 billion in 1992. No matter how you slice it, no matter how it gets taxed (and they’re paying less in taxes as a percentage of their income in 2007 than in 1992), they have a ton more money. And yet none of that has trickled down. More and more jobs get off-shored. Top executives’ pay keeps rising. Minimum wage falls when compared against inflation.

    And I’m supposed to trust that putting more money in these people’s hands is going to suddenly result in them giving away as much or more than they are currently taxed? I’m sorry if I don’t share your faith in the will of the rich man to throw a scrap to Lazarus, if only he had a few heaping piles of food on his table. If he isn’t willing when he has a ludicrous excess to begin with, topping up that excess will not make him more willing.

    And no, I don’t think your neighbors (or mine) are particularly stupid, but the recent track record in this country shows that we are all far too susceptible to feeding our short term interests. Otherwise, explain the incredibly low savings rate, or the willingness of people to go for ARMs and Interest-only loans and such, or the spike in SUV sales when gas prices crashed (and the subsequent and recent attempts to dump them again now that gas prices are at $4/gal. again). I’m not worried about stupid, I’m worried about fickle.

  26. David: We’re obviously doomed to disagree. I think private enterprise is more efficient in business and charity than the government will ever be. I think that throwing even more money at the same federal programs which have given us, or at least perpetuated, the growing wealth disparity problems you cite today is an example of doing the same thing while expecting a different result. Truly a ‘hope-based’ initiative.

    Remember that lowering taxes is not ‘putting more money into’ rich people’s hands it’s leaving it there. It belongs to them in the first place, not to the government, not to ‘the people.’

    I don’t think rich people are villains. They are citizens just like me. I want the law to be blind. Just as criminal law should treat all citizens alike, so should tax law.

    In the end I too think caring for the poor, being wise in my use of physical resources, saving for a rainy day, being kind to others and all the other ‘good things’ the left loudly espouses along with the right, are the right things to do. I just don’t think making it the law is a good idea. “Be kind to your neighbor or go to jail” or “Save for your own retirement or go to jail” are not positions I’m comfortable with.

    AS for all those problems you listed in your last paragraph, low savings rates, ARMS, gas hog SUVs… I find it interesting that the government has a direct hand in all those areas. Social Security takes care of your retirement savings for you! We the government MANDATE that banks must make home loans to bad risk individuals because everyone deserves a house! No, oil companies may not drill for new oil in American fields, because it would hurt the environment! Each one a case where the government created far more problems than it solved in the name of ‘forcing its citizens to do the right thing for their own good.’

    The government is a thumb fingered moron that cares only about getting re-elected. We, the citizens, have made it that way over the years by giving it more and more influence in more and more areas of our lives until today its more effective for businesses and charities to lobby congress than to figure out how to build better mousetraps.

  27. Meg says:

    I\’m a bit late, but I can give you a theory-based argument:
    – Each person should pay sufficiently progressive taxes that the marginal value of the currency given up is equal, with an absolute maximum of what is necessary for what our society considers essential to life and a total value of all taxes collected to cover all value-positive and welfare-enhancing government programs.

    This is much easier with consumption taxes or taxes that cover wealth rather than income than simple income tax. The top 5% have 63% of the wealth, rather than income, which would suggest they are slightly undertaxed by the marginal value of a dollar argument.