We’ve put up with a few weeks of hearing lefty commentators and politicians, plus the much-ballyhooed and completely disingenuous Warren Buffett, gripe about how rich people like him don’t pay as much in taxes as their secretaries do.
Demonstrating a frightfully depressing lack of sincerity, our president echoed this myth yesterday and said “it’s not class warfare, it’s math.”
But is it true?
Doesn’t look like it. Here’s the Associated Press’ fact check (which is anything but a right-wing propaganda release)…
The data tell a different story. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.
There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. That, however, was less than 1 percent of the nearly 237,000 returns with incomes above $1 million.
In his White House address Monday, Obama called on Congress to increase taxes by $1.5 trillion as part of a 10-year deficit reduction package totaling more than $3 trillion. He proposed that Congress overhaul the tax code and impose what he called the “Buffett rule,” named for billionaire investor Warren Buffett.
The rule says, “People making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay.”
“Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it,” Obama said. “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.”
Buffett wrote in a recent piece for The New York Times that the tax rate he paid last year was lower than that paid by any of the other 20 people in his office.
This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.
Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.
Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.
The latest IRS figures are a few years older — and limited to federal income taxes — but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS.
Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.
Noel Sheppard at Newsbusters has this info in graphic form…
You’ll notice that tax rates flatten and then go down as we move to the extremely high-income earners, like Buffett.
There are perfectly good reasons for that.
First, if you make more than $10 million per year, unless you’re Philip Rivers or LeBron James or Sandra Bullock it’s unlikely you’re making it in actual income. Most super-rich folks are paying capital gains taxes on what they make rather than income taxes, because when you’ve got that kind of coin you probably don’t do the 9 to 5 thing; your investments are doing most of the work.
And second, when you’re paying the kinds of tax rates the government hits you with at that level for any length of time, you find the best accountants and tax lawyers and you take their advice to hide your money from the government.
If you’ll notice, the best intake the government gets is from people who make between a half-million and 10 million bucks a year. Typically speaking, those people aren’t the super-rich. They’re folks who have managed to maybe just get a business off the ground (or maybe just sold it) or who are having the best year of their lives income-wise.
In other words, they’re not the established wealthy, who got a snootful of local, state and federal governments pillaging their wallets and went out and hired the lawyers and accountants. These people are still being bled dry; they haven’t gotten wise to how you handle taxes as a rich guy or gal.
And it’s the disappearance of so many entrepreneurs and just-getting-rich people from the economy since 2007 which accounts for this low number on tax receipts in the last couple of years. Democrats will say we’ve got the “lowest effective tax rate” in years or that “effective tax rates are at historic lows” (certainly you’ve heard that line lately) based on the fact that federal tax receipts are around 15 percent of GDP, and use that as a justification for getting rid of loopholes or jacking up tax rates. But it’s simply not the truth that increasing tax rates will increase the amount of money the federal government will take in.
Maybe higher rates, which of course Obama and his people will impose disproportionately on the “rich,” might increase that 15 percent number. What’s more likely, though, is that it will further shrink the pool of people who make between a half-million and 10 million bucks a year – because it will make it less interesting to be an entrepreneur.
You can’t raise revenues by shutting down the economy. You can stop people from getting rich, though. And that way they’ll pay a pretty similar tax rate to what their secretaries make.
Only that’s not a good thing. For anybody.