American Elephants

Pay no Attention to the Train Wreck of the Economy. Worry about “the Rich.” by The Elephant's Child

What’s Fair? Obama’s most repeated theme of the moment is “everybody having a fair shot and everybody doing their fair share and everybody playing by the same rules.” That sounds good, but What’s Fair? and Who Decides?

What isn’t fair at the moment seems to be Warren Buffet, and it isn’t fair that he pays a smaller percentage of his income in taxes than his secretary does.  Mr. Buffet also thinks it isn’t fair that he has to pay so much in taxes, for he is counter suing the IRS over taxes that the IRS wants and he doesn’t want to pay. And while he claims publicly that it isn’t fair that he pays a smaller rate than his secretary, he also brags on his ability to avoid paying capital gains taxes.

Obama wants Congress to pass “The Buffet Rule.” He wants everyone to believe that “the rich” don’t pay their fair share. He is apparently unaware of the fact that we have the most progressive tax code among the OECD.  That doesn’t refer to the progressive party, but to the fact that the rich pay a higher percentage of their income in taxes than do those in the lower quintiles. And they pay way more of the total taxes paid.

If everybody making more than $1 million in adjusted gross income paid a minimum of 30% in federal income taxes, it would increase federal revenues (if they all actually paid) by all of $1.1 billion — 1/10 of 1% of Obama’s $1.2 Trillion budget. The top 10% of earners pay a higher percentage of their income to the government than the top 10 percent in any European country including socialist Sweden.

Americans don’t have a lot of envy of “the rich”— that’s a foreign notion — they mostly hope to get rich themselves.  And they have always seen this as a society where that was a real opportunity for anyone. Americans also believe that the government wastes about 51 cents of every dollar it spends.

According to a poll by the Hill of likely voters, three-quarters believe that the nation’s top earners should pay lower, not higher tax rates. Seventy five percent said that the right level was 30 percent or lower. Only 4 percent thought that 40% was appropriate, which is approximately the rate Obama wants.

Perhaps you know someone who cheerily claims that they want to pay their “Fair Share” in taxes and volunteers to skip all those bothersome deductions, and just pay the rate on the tax tables.  Everybody I have ever known spend a lot of time looking for just a few more deductions.

So Obamas campaign theme of everybody having a fair shot, doing their fair share and playing by the same set of rules, is another of those pleasing phrases that doesn’t stand up to close inspection. What’s fair? There’s quite a bit of disagreement on that, but it’s a lot less that those nice folks in Washington DC think. Who decides? Obama expects to, all by himself. He doesn’t care much about what the rest of us think.

And that plays by the same rules idea? What hypocrisy! This is the administration that has extended over 1.000 waivers to the ObamaCare rules. The same administration that demands that the oil industry give up the deductions that every manufacturer is able to take, by calling them “subsidies.” The same administration that arranges every regulation to favor its union supporters. The same administration that collects taxpayer money to hand out to friends and bundlers who are signing up for federal grants and loans for “clean energy”ventures, and then going bankrupt. And we are finding out about playing by the same rules, big time, from the efforts of the out-of-control EPA.

Pretty words. No fairness involved.

*The marvelous Michael Ramirez can demonstrate Obama’s hypocrisy in one amazing drawing. See his work every day at Investors.


American Income Mobility is a Wonder of the World! by The Elephant's Child
June 30, 2010, 7:00 am
Filed under: Capitalism, Economy, Law, Taxes | Tags: , ,

The Congressional Budget Office has analyzed the 2007 income-tax files.  These graphs show the quintiles into which the Treasury Department divides American taxpayers according to income shown by IRS figures.  The United States has the most progressive federal  tax system of any developed country. Here, in the first graph, are the quintiles of taxpayer income, by percent of all income.

The second shows taxes paid by each quintile of taxpayers by percent of taxes paid.  Each graph can be enlarged by clicking on it.

Here the graph demonstrates the share of pretax income paid, and the shares of total taxes paid by all.

The highest quintile of earners, the fabled “rich” pay 70 percent of all taxes paid.  Is that enough, too much? What does this information do to all the “soak the rich” demands? Most people when queried about how much taxes anyone should pay, believe that no one should pay over 25 percent.

Obama’s redistributive policies are based on a concern that there is too big an income gap between the rich and the poor. But the poor are not getting poorer, they are getting richer too. Nearly 60 percent of taxpayers move up from the bottom quintile within ten years. Nearly 40 percent of taxpayers move down from the top quintile during the same period.

A report from the Tax Foundation, once again shows that roughly half of millionaires during the period w999 through 2007 attained this status just once during those nine years.  Only 6 percent of this group were millionaires in all nine years.

The problem with all the political attacks on “the rich” and the complaints about the “income gap” is that they are based on snapshots of the population at a moment in time, and do not recognize the extraordinary mobility of Americans through income distribution.  Most people start out poor, their income grows as they rise through a working life, and declines as it ends and they enter retirement years.

Keep in mind that most jobs are created by those upper quintiles.  So what is fair, and what is moral?

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