It’s So, So Sad, That The Top 20% of Americans Pay 87% of Taxes

Tax day is almost upon us in the (dis)United States of America. What better time to press pause and reflect on wealthy Republicans’ rhetoric about how unfair the tax system is.

Wealthy Republicans routinely lament that The Left “plays the victim” time and time again, but that doesn’t stop them from complaining endlessly about how unfair it is that they have to pay such a large percentage of the country’s taxes. When I listen to them complain about the unfairness of it all, they kinda, sort of, almost sound like victims.

I might have some empathy for them if they weren’t getting wealthier over time, but they are, and that point is lost on passive readers of recent tax headlines. It’s time for at least a little critical thinking by digging deeper into the much publicized 20%-87% refrain.

Specifically, key details from a recent Wall Street Journal article deserve closer scrutiny.

Drawing on research conducted by the non-partisan Tax Policy Center, they report:

“For 2018, households in the top 20% will have income of about $150,000 or more and 52% of total income, about the same as in 2017. But they will pay about 87% of income taxes, up from about 84% last year.”

There’s two very different ways to read this. The wealthy Republican way is to focus exclusively on the second sentence. “Hey, now we’re paying even 3% more of the total, whah, whah, whah.” The other way is to ask, “What effect did that 3% bump have on your total income?” The details in the article show that in 2017 the top 20% earned 52.1% of the country’s total income, in 2018 it is projected to be 52.2%. As they used to say on the tough streets of Cypress, CA, no harm, no foul.

Two more critical sentences for our wealthy Republican friends to try to spin:

“To be sure, this analysis doesn’t include the flow-through effects of corporate-tax cuts, which benefit higher earners more than lower earners, or the doubling of the estate-tax exemption to about $11.2 million per person. Neither levy is part of the individual income tax.”

Those ultra-wealthy tax advantages mean the total wealth of the top 20% (including stocks, real estate, and other assets) continues to increase relative to the remaining 80% at an even faster clip than income.

Therefore, all of these things are true:

• the wealthy pay a lot in taxes

• in 2018, the wealthy will pay a slightly larger share of total taxes

• the income of the top 20% tax-payers; and especially their total wealth, continues to increase relative to the bottom 80%

Wealthy Republicans are determined to distract the masses from the fact that their share of the economic pie continues to increase. One tried and true way to do that is control the message by repeating over and over that the tax system is inherently unfair.

Also, ever notice how they keep threatening to stop working as hard given their unfair tax burden, and yet, somehow, their proportion of total income and wealth continues upwards?

Here’s another sentence our wealthy Republicans friends will wrap themselves in like a warm, cuddly blanket.

“Roughly one million households in the top 1% will pay for 43% of income tax, up from 38% in 2017. These filers earn above about $730,000.”

The above logic applies to this factoid in the exact same manner.

In summary, wealthy Republicans only want one question asked, “What share of the income tax do the wealthy pay?” They work tirelessly to avoid anyone asking “How are the wealthy doing vis a vis everyone else?”

Because I’ve raised it, I will now be entering the Witness Protection program. Hoping to land in a warmer, sunnier locale. Depending on how Cleveland does in the playoffs, I will be changing my name to LeRon.

Postscript: WSJ commenters are scary conservative. The linked article has 815 comments attached to it. I would rather serve a ten year sentence in a Turkish prison than have to read any of them.

 

 

 

I Just Bought a Drone

Tuesday night, while the Good Wife and I slept, our checking account was ransacked by the Internal Revenue Service. This is where our (personal) record amount of federal taxes will eventually end up.

BF-AH180_12taxr_G_20140411180904

The Internal Revenue Service needs reinventing. Could there be a worse name? It sounds like something from an Eastern Bloc dystopian novel. How about the Public Commons or the Public Commons Service? Now the most dreaded sentence in the English language will be, “Hi, I’m from the Public Commons Service.”

Granted, that’s barely scratching the surface of what’s wrong with the PCS. The main problem with our tax system is once our checking account is raided, we have next to no say over where our federal tax dollars go (apart from voting for two senators and a congressional representative). For example, despite being anti-war educators, 27.7% of our federal taxes go to the military (defense and military benefits + veteran benefits) while 1.32% goes to education. We’re forced to help purchase drones, when we’d much rather help purchase improved teacher salaries.

At the same time, our hawkish neighbors might compensate for our military stinginess by designating far more than their 27.7% for the Pentagon. And of course, our other neighbor, Dan, Dan, The Transportation Man, would significantly increase his 2.65% transportation contribution.

A few significant improvements would result from this experiment in direct financial democracy. 1) Complaining about tax rates would decline. 2A) Government departments and programs would have to explain to the public why they’re deserving of a greater percentage of the total revenue available. And 2B) The more they could demonstrate fiscal responsibility, the more support they’d gain.

Admittedly, these ideas won’t slow the accelerating gap between the Haves and Have Nots. On April 15th, I listened to a panel of tax experts discuss tax reform on the Diane Rehm Show. I was much more intrigued by the tone of the discussion than the details of their ideas. The tone was, “Our tax system is so complex that improving it by simplifying it is impossible, but I’m happy to play along with your national audience anyways.”

As anyone who has tried to improve K-12 schooling, reduce global warming, reduce money’s influence in politics, or eradicate drugs and crime from their community will tell you, those who have a vested interest in the status quo benefit greatly from a sense of overwhelming complexity. Reformers, whether tax or otherwise, can’t wrap their arms around the whole problem, and therefore, don’t know where to begin making changes. Eventually they try piecemeal reforms. Before those reforms take hold, people’s patience runs out. Gradually, everyone and everything reverts back to “normal”. With each passing year or decade, what’s viewed as “normal” becomes more deeply entrenched, making significant change even more difficult.

Tax reformers have lots of good ideas including deductions they’d tweak or eliminate altogether. But they can’t see the forest because of the trees. Their ultimate challenge is to convince the public that simplifying and improving our tax system is possible.