Tax the Rich? No, We Haven't Taxed the Little Leaguers Yet

It gets tiring to hear arguments based on emotion rather than facts.

Like Rush Limbaugh saying: "The top 1% is paying nearly ten times the federal income taxes than the bottom 50%!" This is true. But AFTER TAXES, the top 1% keeps 20% of the nation's income, while the bottom half of earners retain just 14%.

Or the argument that low-income people don't pay taxes. Based on recent data from the U.S. Congressional Budget Office and the Internal Revenue Service, the total of all state and local taxes, social security taxes, and excise taxes (gasoline, alcohol, tobacco) consumes 21% of the annual incomes of the poorest half of America. For the richest 1% of Americans, the same taxes consume 7% of their incomes.

Or the aversion to 'redistributing' income, because that's a form of socialism. From 1980 to 2006 the richest 1% nearly tripled their after-tax percentage of our nation's income, while the bottom 90% of America has seen their share drop over 20%. Either the wealthy started working 3 times harder or we've experienced a massive redistribution of income toward the rich.

Internal Revenue Service figures show that almost half of our country's income goes to the richest 10% of Americans (those making at least $283,000 a year). The distribution of wealth is even more skewed, with the richest 1% of Americans owning more than the poorest 90%.

Here's another way to look at it. Since 1980 our country's productivity has steadily risen, with total income doubling approximately every 10 years. If the bottom 90% of America had shared in this prosperity at a level consistent with 1980 incomes, they would be making $45,000 a year instead of $35,000.

Local initiatives to balance the budget generally target middle-income earners. Regressive state income taxes, the sales tax, new property taxes, gas taxes, sin taxes, utility costs, license fees, parking meter rates. If this isn't enough, there might be a cutback on after-school programs in low-income areas, or a cutback on park services, even if it means some of the parks won't open as a result.

We rarely hear serious proposals to return income tax rates to the levels that helped to build a strong middle class a half-century ago.

Innovative, industrious business leaders certainly deserve to be well-compensated for their efforts. But it's a rare individual who has succeeded without the support of numerous other individuals within the company, or of all the outside people who provided the education, research, and product development that inevitably led to that success.

Don't penalize success. But don't skew the gains of productivity toward the rich, either. Great economists like Adam Smith, John Kenneth Galbraith, and John Maynard Keynes recognized that reasonable limits must be in place to curb abuses of the capitalist system. A progressive income tax is the best way to do this, no matter how much yelling we hear from the top.