Scott Hodge of the Tax Foundation has, in rebuttal to President Obama’s State of the Union speech, published two charts that show how radically progressive our current tax system is:
We found that federal tax and spending policies are already very progressive and redistributive. As the charts below indicate, the bottom 60 percent of families – those earning under about $85,000 in 2010, receive more in total spending benefits from government than they pay in all taxes combined. In other words, the benefits they receive from government – from education and roads to national defense and welfare – greatly exceed all the federal taxes they pay – from income and payroll taxes to gasoline and corporate income taxes.
Indeed, the lowest-income Americans paid less than $1,700 in total taxes, but received $17,617 in spending benefits. In other words, they received more than $10 in spending benefits for every $1 they paid in taxes of any kind. Remarkably, middle-income families – whom Obama says government does not do enough for – got $1.15 in spending benefits for every $1 they pay in taxes.
By contrast, the top 40 percent of families pay far more in taxes of all kinds than they receive back from government in benefits. For example, families earning between roughly $86,000 and $110,000 paid an average of $23,289 in total taxes, but received $22,938 in benefits – equal to about 0.98 cents on the dollar. The wealthiest families, those earning over $712,000, paid more than $660,000 in taxes but received $283,000 in spending benefits – equal to about 0.43 cents on the dollar.
The charge that the rich aren’t paying their fair share of taxes is a blatant lie. But in spite of its dishonesty, it sticks. Why? Because few people will take the time to research and understand the truth, which, as Scott Hodges illustrates, is that the rich and successful fund the lion’s share of government and receive relatively few benefits in return.
So, yes, unfairness exists, but not in the class-warrior way the radical left wants you to believe. Unfairness exists because those who pay the least into the system receive the greatest benefits from it and those who pay the most into the system receive the fewest benefits from it. What egalitarians really object to is that the system isn’t unfair enough.
Progressives simply cannot abide the fact that some folks are wealthier and more successful than others. They just know in their bleeding, tolerant and compassionate hearts that if inequality exists, it must be a result of greed, treachery and abject cheating.
Make no mistake about it, liberals’ primary goal is income and wealth equality. Consequently, they will do anything they can to malign, defame and undermine the wealthy and successful, regardless of how much these folks pay into the system and how little they take out of it.
These radical egalitarians have no earthly clue as to how to raise the prosperity of the poor, so, in order to achieve their Utopian equality, they promote policies that will lessen the prosperity of the rich. And the number one policy they espouse to acheive this artificial equality is confiscatory taxation. Of course, the only way they can get the masses to support tax increases on the rich is to convince them that the rich are, a) gaming the system; b) getting all the breaks; and c) not paying their fair share, so they lie, lie, lie, just like Alinksy told them to do.¹
Scott Hodges’ charts won’t stop these class-warriors from lying, but they at least provide powerful evidence that they are lying.
Footnotes:
¹ Here are some examples of the subversive trash Alinsky peddles in Rules for Radicals:
The organizer dedicated to changing the life of a particular community must first rub raw the resentments of the people of the community; fan the latent hostilities of many of the people to the point of overt expression. He must search out controversy and issues, rather than avoid them, for unless there is controversy people are not concerned enough to act.
The tenth rule of the ethics of rules and means is that you do what you can with what you have and clothe it in moral arguments. …the essence of Lenin’s speeches during this period was “They have the guns and therefore we are for peace and for reformation through the ballot. When we have the guns then it will be through the bullet.”
John Berlau and Trey Kovacs of The Wall Street Journal point out that Mitt Romney’s capital gains income was paid with after-tax corporate dollars and, therefore, taxed twice.
I don’t expect people on the left to understand this. And even if they do, I don’t expect them to stop their anti-rich, class-warrior, Buffett secretary nonsense. But hope springs eternal.
Mitt Romney’s True Tax Rate: 44.75%
Wall Street Journal op-ed, Romney and the Burden of Double Taxation, by John Berlau & Trey Kovacs (both of the Center for Investors and Entrepreneurs, Competitive Enterprise Institute):
When double taxation of investment income is taken into account, Mr. Romney most likely underestimated his effective tax rate on the campaign trail. The former Bain Capital CEO and Massachusetts governor caused a brouhaha last week when he estimated the tax rate on his investment income at 15%. “How unfair!” pundits exclaimed, noting that the top marginal rate for wage income is more than 30%.
The tax rate on investors is unfair, but for the opposite reason. Our tax code layers taxation of dividends and capital gains on top of a top corporate tax rate of 35%—which even President Obama acknowledges is one of the highest in the world.
This is ironically the embodiment of the “corporate personhood” legal doctrine otherwise so decried by the left. The law taxes corporations as if they were separate beings from the shareholders who own them and then levies a separate tax on shareholder payouts and gains. This double taxation brings the effective tax rate on investment income to as much as 44.75%.
In other words, after the combined top tax rates hit $100 of corporate income, $55.25 remains for the investor. And this figure doesn’t even include various state and local taxes, or the death tax. …If the traditional disclosure of tax returns is elevated into a “teachable moment” about the burdens of double taxation, all Americans could be winners.
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John Kerry, the Democratic nominee for President in 2004, paid a lower rate of taxes than Mitt Romney paid in 2010. Of course, we didn’t hear much about Mr. Kerry’s low tax rate from the mainstream press even though, unlike Romney, he thinks the rich are undertaxed.
It almost seems unfair to point out that unlike Mr. Romney, who earned his money through hard and intelligent work, Mr. Kerry married into his.
Professor James Maule has, once again, lied about who tells tax lies. He lists five myths – he really means lies – which he says the right tells about taxes. In this post I will discuss and hopefully refute the first three of them.
Maule’s First Myth
The first myth, that “47% of Americans do not pay taxes” is a fairly new one, advanced to support the proposition that the poor should fork over more of their income and assets because the wealthy are over-taxed. The flaw in the statement is that it would be accurate if the adjectival phrase “federal income” were inserted before the word “taxes.” By leaving out those important words, the authors of the statement convey a meaning that is not supported by the facts.
My Response
No serious person on the right has ever suggested that the poor should pay more taxes because the wealthy are over-taxed. That is a left wing lie and Maule knows it. Conservatives want everyone to pay less taxes. Maule knows that, too.
The truth is, and I suspect Maule knows this as well, that conservatives cite the 47% statistic to defuse an actual lie repeatedly told by the left: That the rich don’t pay their fair share of income taxes.
The obvious point is - for anyone who is not blinded by ideology, that is – that if the top 50% pays 100% of the federal income taxes, the assertion that the top 50% does not pay its fair share is false.
And, of course, Maule knows that we are and always have been talking about federal income taxes. After all, it was the left that began the argument by framing it in terms of federal income taxes. Progressives like Maule said that the rich were not paying their fair share of taxes and because they weren’t we must increase their federal income taxes. Progressives didn’t say that the rich weren’t paying their fair share of sales taxes or excise taxes or state income taxes. Again, they said the rich weren’t paying their fair share of federal income taxes.
Maule knows very well that when conservatives say that 47% of Americans don’t pay taxes they mean they don’t pay federal income taxes. And by trying to get you to believe that conservatives are lying about who does and who does not pay taxes in America he is being the dishonest one.¹
So, conservatives have pointed out that 47% of Americans don’t pay taxes as a rejoinder to the left’s absurd claim that the rich are not paying their fair share of federal income taxes. Conservatives are countering with the obvious and simple argument – one that obviously disturbs the pro-tax, class warrior left – that proves that the rich are, in fact, paying more than their fair share of federal income taxes.
The reason Maule must label the truthful statement “47% of Americans don’t pay federal income tax” a lie is because it doesn’t conform to his stereotypical and simplistic conviction that the rich get all the breaks and are sticking it to the poor. A conviction that he and those of his ilk must get the public to share in order to gain support for their plan to confiscate wealth from the haves and redistribute it to the have nots.
Sadly, rather than changing his beliefs to conform with the facts, Maule calls the facts a lie. And the only way he can call this particular fact a lie is to recast it from “47% of Americans don’t pay federal income tax” to “47% of Americans don’t pay any tax at all.” Nobody serious has ever made the latter argument and Maule knows it.
This, folks, is what dishonesty looks like.
Maule’s Second Myth
The second myth, that “The American people and corporations pay high taxes” is a bit more difficult to parse. What is meant by “high”? Compared to a one-percent tax rate, there is a plausible argument that most American people and corporations pay high taxes, because even 15 percent is “high” compared to one percent. On the other hand, if the statement is intended to make people think that Americans are taxed at a higher rate than are people and corporations in other countries, the statement is misleading. In 2009, every developed nation except two imposed taxes as a percentage of gross domestic product at rates higher than those applicable in the United States.
My Response
Whether or not Americans are overtaxed has nothing whatsoever to do with the tax rates in Japan, Germany, France, the UK or any other sovereign nation. Most Americans don’t want to be like France, even if Professor Maule does.²
What Maule won’t tell you, but should, if he were honest, is that he prefers the European socialist model to the American free market model and accordingly, instead of concluding that Europeans are overtaxed, concludes that Americans are undertaxed.
You be the judge of who is misleading whom.
And why do you suppose Maule clumsily combines “the American people and corporations” instead of comparing, as tax scholars have done since 1913, corporate tax levels in America to corporate tax levels in other countries and individual tax levels in America to individual tax levels in other countries? The reason is apparent: By combining the two, Maule artfully avoids the thorny little fact that America has the highest corporate tax rate in the civilized world.
It may be subtle, but it’s still dishonest.
Maules Third Myth
The third myth, that “cutting taxes creates jobs and raises revenue” has been around for several decades. It makes for a great sound bite, but it’s factually erroneous. The lowest average annual growth in gross domestic product during the past 60 years has occurred when the top marginal rate is where it is today. The highest rate of growth occurred during years when the top income tax rate was in the high 70-percent range. The second highest rate of growth was when the top income tax rate was in the, indeed, 90-percent range, but that surely was attributable to the global war then being waged. The third highest rate of growth, within a whisker of second place, was when the top income tax rate was 39.6 percent, which is where it was before the Bush tax cuts went into effect. Those cuts drove the growth rate down to its lowest point. Surely the third myth is a pre-emptive strike against those who want to return to the rates as in effect before the Bush tax cuts, although opponents act as though people were advocating a return to the days of top rates in the 70-percent and 90-percent ranges.
My Response
Once again Maule does the dishonest conflation thing by attributing to all conservatives the argument that “cutting taxes creates jobs and raises revenue.” But Maule knows very well that many, if not most, conservatives don’t want to raise government revenues at all. They want to cut spending. And this is true even of those who believe that tax cuts create jobs. The reason Mr. Maule conflates these two separate and distinct arguments is because there is powerful and ample evidence that tax cuts do, in fact, create jobs and that no less a liberal personage than President Barack Obama has taken credit for it.
Now, let’s take the last sentence of Maule’s mythical third myth. Here, Maule is intentionally not telling you that the left’s hallowed economist, Paul Krugman, and many others (and I suspect even Maule, himself) believe that the top tax rates should be in the 70% to 90% range. The goal, remember, is wealth equalization. That’s why we hear all this class-warfare nonsense about income inequality.
Astute observers of the political scene know that whatever the top tax rate is as long as the rich have considerably more wealth than the poor and the middle-class Maule and those of his ilk will claim that the system is unfair and that the rich aren’t paying their fair share. It’s a slimey slope, indeed. First the rate goes to 39.6%, then it goes to 41.0%, then it goes to 45% and so on and so on until we get to Krugman’s optimal rate of 70%. The arguments the left makes now, when the top rate is 35%, will apply equally when the top tax rate is 50% or 60%, because it will always be true that rich people have more wealth than poor people and, therefore, can afford to pay more taxes.
Maule is also being dishonest when he cites statistics that show that economic growth was greater in periods of higher taxation than in periods of lower taxation. Surely he knows that correlation is not causation and that there are myriad other factors that play a part in the growth or contraction of an economy. But he hopes you aren’t smart enough to catch it or diligent enough to refute it.
Using Maule’s “correlation means causation” mode of argument, one could just as easily conclude that it was rampant government spending that stunted economic growth and not the Bush tax cuts. Of course, Maule would never make this connection because he favors increased government spending, so much so that he thinks we need to tax Americans more in order to fund that spending.
Maule, in his third mythical myth, provides a dishonestly simplistic explanation of extremely complex phenomena in the cynical hope that his readers will not research the matter further. Sadly, in that, he may be right.
Footnotes:
¹ I think it was Freud who said that what a man regularly criticizes in others is likely to be something he loathes about himself. It seems to come easily to Professor Maule to call other people liars. Perhaps I’ve demonstrated in this post that Maule’s propensity to challenge the honesty of others might very well be a classic case of psychological projection.
² The propensity to point to other countries (some of whom have unemployment rates as high as 15%) as models for what America should do is a vile habit of the left. Maule does it here with great aplomb. Liberals simply do not have a high regard for America and Americans. Whatever we do is wrong. Whatever other countries do is right, despite the fact that many of these countries’ ships of state could not sink any faster if they were captained by Francesco Schettino.
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Reuters reports that Mitt Romney will release his 2010 tax return and an estimate for 2011 on Tuesday:
Humbled by a stunning loss in South Carolina, Mitt Romney said on Sunday he would release this week the tax returns demanded by rivals in his bid to regain the upperhand in the volatile Republican presidential race.
Romney, the longtime frontrunner in the Republican race and one of the wealthiest presidential candidates in history, lost to a resurrected Newt Gingrich in the conservative southern state on Saturday after stumbling badly in debates with clumsy responses to demands that he disclose his tax history.
“We made a mistake holding off as long as we did and it just was a distraction,” Romney said on “Fox News Sunday.”
There is a debate in Florida on Monday and if Romney had failed to satisfy those calling for the release of his tax returns before then, his failure to do so would have been used once again to bludgeon him. And by not releasing his tax returns before the debate he deprives his opponents and the NBC moderators fodder for difficult questions.
Announcing that Romney’s tax returns will be released the day after the debate is a brilliant damage control move by the Romney folks.
By way (once again) of Paul Caron (emphasis is mine):
Smith: The APA’s Reasoned-Explanation Rule and IRS Deficiency Notices
Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.), The APA’s Reasoned-Explanation Rule and IRS Deficiency Notices, 134 Tax Notes 331 (Jan. 16, 2012):
The D.C. Circuit’s confirmation in Cohen that the Administrative Procedure Act (APA) applies to the IRS raises the question of what that application will mean. The APA’s arbitrary and capricious standard for judicial review of agency action incorporates a requirement that agencies provide contemporaneous reasoned explanations for their actions, which clearly applies to IRS regulations.
This report contends that the APA’s reasoned explanation requirement also applies to IRS deficiency notices. Pre- APA case law held that IRS deficiency notices need not contain any explanation, but this conclusion has not been reexamined in light of the act’s arbitrary and capricious standard.
The pre-APA conclusion that IRS deficiency notices need no explanation cannot stand when reconsidered in light of the APA’s reasoned explanation requirement.
This sounds about right. And if it is right and is enforced by the courts, it’s good news for taxpayers and their representatives.
