Friday, February 25, 2011

Fair?

I’m constantly amazed at what different people define “fair” as.  In his commentary to rally Democratic support, Robert Reich, former secretary of labor during the Clinton administration, offers the opinion that “if the super-rich paid their fair share of taxes, government wouldn't be broke”.  Apparently, Reich’s version of fair means that those with higher incomes should pay a disproportionately large portion of the total income tax.  Referring to the IRS’s own numbers for adjusted gross income share by percentage and total income tax share by percentage for different segments of the top wage earners in the United States (rows 146-191 of the linked Excel sheet); you will see an interesting trend.  The tax burden on the richest of Americans has increased over the period of time that this table covers.  The year 2007, the most recent data available, shows that the top 0.1% of wage earners in the U.S. earned 11.93% of the total income but paid 20.19% of the total income tax collected.  In overly simplified numbers, the top 0.1% made 1/10 of the money, but was ultimately responsible for 1/5 of the income tax.  Reich refers to the richest 5% of Americans in his argument.  Their numbers don’t seem to be fair either.  They earn 20.53% of the total income and pay 37.44% of the income taxes collected.  Surprisingly, the top 50% of wage earners earned 87.74% of the total income in the U.S., but paid 97.11% of the income taxes.  Extrapolated out, that must mean that the bottom 50% of wage earners in the country only paid 2.89% of the tax burden.  I’m definitely not for kicking the small guy when he is down, but to make the assertion that the rich are not paying their fair share simply is not supported by the numbers.

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