With April 15 having just passed, the scars are still fresh. I hope you're not one who rejoiced over your tax refund as if the feds were presenting you with some kind of gift. Generally, if you're getting a refund check it's only because excessive taxes were withheld from your paychecks all year. What you'll be getting back is your own money, the return of principal on the interest-free loan you were kind enough to extend to the U.S. Treasury in 2004.
Molly Ivins, the folksy, sassy socialist from Texas (by way of The New York Times, where she once worked as a reporter, which speaks volumes about the leftist bias of Times reporters) has her own views on taxes. Good golly, Miss Molly's latest nationally syndicated diatribe on the subject was headlined, "Tax system favors the super-rich." This, of course, is nonsense on stilts. Those who make over a million dollars a year - that's 169,000 tax returns out of about 130 million - constitute one-tenth of 1 percent of all tax filers, earn 8 percent of aggregate individual income, and pay 17 percent of the nation's total individual income tax bill all by themselves. Federal income taxes average 28 percent of their adjusted gross income.
On the other hand, the bottom 50 percent of tax filers - those 64 million Americans making less than $29,000 - earn 14 percent of aggregate individual income and pay a mere 3.5 percent of the nation's total individual income tax bill. Federal taxes average about 3 percent of their adjusted gross income. A typical family of four with just under $40,000 of income, after exemptions, deductions and credits, pays zero federal income taxes.
So how can Ivins say such things? She cites as her source, her "favorite authority on taxes," David Cay Johnston of The New York Times (there's that paper, again), author of the book, Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super-Rich - and Cheat Everyone Else. Doesn't sound like there's any political agenda in that title.
Says Johnston, "People making $60,000 paid a larger share of their 2001 income in federal income, Social Security and Medicare (italics mine, see "clever trick," below) taxes than a family making $25 million . . ." Well, duh, of course they do. They also spend a larger share of their income, than do millionaires, on food, clothing, shelter, iPods, automobiles, vacations, toilet paper and candy bars.
You see, the super-rich have more disposable income, much of which is reinvested in our economy adding to the capital stock and creating jobs. That's what capitalists do. Moreover, the super-rich derive a much larger portion of their income from capital gains and municipal bonds than do wage earners. Capital gains are taxed at a lower rate because the principal invested has already been taxed. And interest on municipal bonds is exempt from federal taxes because the Supreme Court ruled in 1895 that it would be unconstitutional to treat it otherwise.
But notice Johnston's clever trick. Since those who make under $60,000 pay only about 20 percent of the nation's income taxes, he combines income taxes with Social Security and Medicare taxes to muddy the waters and inflate their relative tax burden.
In exchange for the modest taxes they pay, those who make less than $60,000 benefit to a much greater extent from various social spending programs than do the super-rich who don't qualify for day care, food stamps, housing subsidies, Medicaid, etc. In the final analysis, upper-income earners are net tax payers while lower-income earners are net tax receivers. The rich pay a smaller portion of their income on Social Security taxes precisely because there's a cap on income subject to the Social Security payroll tax. And the reason there's a cap on that tax is because there's a cap on benefits, too. If there weren't, this so-called "social insurance" system would be just another bald-faced redistribution-of-income scheme - which is exactly what the Democrats hope to make it.
Income taxes are progressive. Upper incomes are subject to a higher marginal rate than lower incomes. That's why poor people in this country pay nothing in income taxes and the well-to-do pay the lion's share. Other taxes, like sales taxes, property taxes and payroll taxes aren't progressive, that is, everyone pays the same rate regardless of income. We have that mix so that most people pay at least some tax. Otherwise the tax users would pick the taxpayers clean. That's called socialism. |