George W. Bush, who was perhaps the most profligate Republican spender in history, had one crowning achievement in his presidency. He rolled back the unconstitutionally retroactive tax hike imposed by Bill Clinton. That tax rollback, without action by Congress, will expire this year.
President Obama has recently taken to the campaign trail to decry the unfairness of this proposed lower tax rate, since it is a well known fact that high income earners do NOT pay their fair share. (Sarcasm intentional). On this, he is in complete agreement with Clinton. Presidents Obama and Clinton never let the facts get in the way of pandering to potential voters.
That there is exists a level of inequality in income is not in dispute. But what about fairness?
The distribution of pretax income in the United States today is highly unequal. The most precise studies suggest that the top 10% of households, with average income of about $200,000, received 42% of all pretax money income in the late 1990s. The top 1% of households, averaging $800,000 of income, received 15% of all pretax money income.
Interestingly, the income inequaltiy has risen over the last several decades, which is cited by many as proof of the heartlessness of the rich, the Wall Street generation and indifferent Republicans. Ironically, entitlement spending, designed to address this inequality, has literally exploded at a parabolic rate, yet has had absolutely no impact on inequality, except to make it worse.
So, for the accusation that rich do not pay their fair share to hold water, we would expect that distribution of taxes should be less skewed with a greater burden on the poor, right?
It would seem that data from the U.S. Treasury cast cold water on this claim.
According to recent Treasury figures, the top 0.1% of taxpayers by income pay 17.4% of federal income taxes (earning 9.1% of the income), the top 1% with gross income of $328,049 or more pay 36.9% (earning 19%), the top 5% with gross income of $137,056 or more pay 57.1% (earning 33.4%), and the bottom 50% with gross income of $30,122 or less pay 3.3% (earning 13.4%).
If we examine the wealth distribution rate, the net wealth (not only income but also including real estate, cars, house, stocks, etc) distribution of the United States virtually perfectly coincides with the share of income tax – the top 1% pay 36.9% of federal tax (wealth 32.7%), the top 5% pay 57.1% (wealth 57.2%), top 10% pay 68% (wealth 69.8%), and the bottom 50% pay 3.3% (wealth 2.8%).
President Obama and Clinton love to talk about tax cuts for the middle class. If the bottom half of income earners contribute a paltry 3.3% to the total taxes received, how on Earth could they get their taxes cut? You can only cut taxes to those who actually PAY tax. Sure, it makes for a great campaign speech to those who don't know any better such as our friends in the media, but it just doesn't hold up under any scrutiny.
In a democratic society where the majority rules, what better way to buy votes than to virtually exclude half the population from taxes? Soak the rich rhetoric plays well to the liberal media, but makes no economic sense whatsoever.
I do agree with Presidents Obama and Clinton on one thing. The rich SHOULD pay their fair share. If someone would send each of them a link to this piece, I have NO DOUBT that they will acknowledge the error of their ways and immediately cut taxes for the high-income segment of the population! (Sarcasm intentional).
Marko's Take
Interestingly enough, the media has reported over the last day or so that under Mr. Obama's tenure, the number of poverty-stricken families has increased significantly. Of course, the terrible economy has something to do with it, and further of course, the brunt of any economic downturn is felt by wage earners at the bottom of the range, but it is clear that the POTUS' policies have exacerbated the situation.
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