(Disclosure: I’m not a "1 percenter", though I’d love to be one.)
As Americans sit down to file their federal tax returns, a simple question comes to mind — what’s a "fair share" to give the federal government in taxes?
For half the working population, fair means paying almost no income taxes at all.
"The top 10 percent income earners pay about 70 percent of federal income taxes," says Will McBride of the Tax Foundation. "The bottom 50 percent of tax filers have, they pay almost no federal income tax. They pay about 3 percent of federal income taxes."
President Obama’s phrase that everyone should “pay our fair share of taxes” has become something of a political mantra. He has used the expression in dozens of speeches, beginning back in his State of Union address in January. More recently, he told University students in Virginia, "we do expect everyone to do their fair share.”
But for many of the people who pay no taxes, the government also allows tax credits, which end up providing refunds.
"Close to a hundred billion in checks sent out by the IRS (go) to folks who have no tax liability," McBride said. "So the IRS is becoming a spending agency."
Thus, why Obama actually has a chance in 2012.
You’re ignoring the payroll tax, which is a significant source of federal revenue.
Hi Zach,
you’re ignoring the 47 percent that pay no taxes, which is a significant voting bloc for Democrats and a good argument as to why we can’t generate adequate revenue.
(revenue is fine, it’s spending we can’t control).
Jason: you’re ignoring the 47 percent that pay no taxes, which is a significant voting bloc for Democrats and a good argument as to why we can’t generate adequate revenue.
We’ll try again. 47% pay no federal *income* taxes, during the worst economic downturn since the Great Depression, after repeated extensions of marginal tax cuts from the Bush Administration. About 40% of federal revenues are from payroll taxes, and nearly all workers incur payroll and excise taxes. In 2007, the average federal tax burden by quintile was 4.0, 10.6, 14.3, 17.4, 25.1. While the payroll tax burden was 8.8% for the lowest quintile, it was only 5.7% for the highest quintile.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456
Interestingly, we rarely hear anything about the answer other than “more” or “less” for this or that group of people. What makes more sense is a principle that can be applied across multiple specific cases. The one that makes the most sense to me is the “You want it, you pay for it.” principle. The idea of using the power of government force to take money from someone else and give it to you (either in the form of cash or some kind of subsidy or service) seems little morally different from plain old-fashioned robbery. Saying on the other hand, “I want benefit X and providing that for me costs Y so I should be taxed at Y rate.” may have other problems but at least it doesn’t have that one. So what might this look like in practice? Well, if you want the government to provide you with roads then you should pay an amount proportional to your use of them, so something like a gasoline tax that pays for the roads you use makes sense. If you want unemployment insurance then you should pay the cost of that in proportion to your likely use of the benefit. If you want a government school then you should pay for that yourself too. This not only avoids the worst cases of robbery by government but it also places the responsibility for paying right next to the benefits and if you don’t like the way the government-run parks in your neighborhood are being run you can either provide additional funds to improve things or stop paying for them because the money is just being wasted. Compare that to the way things work today where so much money gets run through the federal and state blenders and redistributed to individual fundamentally local projects that there’s a “use it or lose it” mentality at work with all of this “free money”, and the folks a thousand miles away paying for your neighborhood park only know that they don’t like sending all of that money into the blender but they have no idea where it goes.
Remember the “Bridge to Nowhere”? This approach would solve that quite neatly. Nobody sane would spend his own money like that. Only the government can generate such stupidity.
We could pretty easily and objectively measure what it costs to provide services to people and charge them for them. Of course a lot of people are used to living at someone else’s expense through the government but they should stop doing that no matter how much fun it seems to be.
There are alternate models though…the “everyone should experience similar levels of suffering as a result of taxation”, or “people who contribute a lot to society through their economic activities have already ‘paid at the office’ and tax burdens should fall most heavily on those who cause problems (like criminals for example who should be forced to pay for the cost of the police, courts, and prisons should pay the most”, or perhaps it should be randomly assessed as in a principle that says “we should have an anti-lottery in which some people pay more or less in taxes based on random chance”. Sure some of these are pretty goofy, but not as goofy as not having any principle at all other than “I have the power and I want to take your stuff because the political consequences for me will be more positive than negative if I do.” which seems to me to be the main principle implicitly in operation today.
–Brian
Brian Yoder: Well, if you want the government to provide you with roads then you should pay an amount proportional to your use of them, so something like a gasoline tax that pays for the roads you use makes sense.
That doesn’t really solve the problem. Why put the road here rather than there? There are a give-and-take for every decision. Then there’s national defense. Not everyone agrees to every war. Or scientific investment.
Zachriel: I didn’t mean to solve all of the problems of government with this principle or answer every question (perhaps I will post that brief essay tomorrow
. I was just addressing one narrow issue which is how to pay for the things that the government has (rightly or wrongly) decided to do. One of the bad things about the way things work today is that generally the people paying the costs are not the people getting the benefits and that’s a key source of resentment, corruption, irresponsibility, and ineffectiveness in our relationship with the government today.