Research from the tax foundation, based in D.C. has revealed that “the rich” pay way more than their fair share of taxes in the United States. The Daily Caller reports that the top 10% of earners in 2011 payed 70% of federal income taxes. Interestingly enough, 47% of the population has no income tax liability. And to get an idea about the trend in tax structure, in 1986 the top 10% paid 55% of federal taxes. The Congressional Budget Office numbers from 2009 show that the top 20% of earners paid 68% of federal taxes that year. This can only mean that the media and certain politicians are promoting a view of “the rich” which is not accurate. But little pieces of the puzzle are what give the media and politicians a little bit of truth to mix with their lies.
Turns out that last year there were 4,000 households which earned over a million dollars, and paid no income taxes at all. This relatively small group is represented as “the rich”, while in reality, there were 267,996 millionaire tax returns in 2010, according to taxfoundation.org. Many proposals to increase taxes would effect the millionaires who pay taxes, and do virtually nothing to collect taxes from the other 4,000. That is why it makes more sense to close tax loopholes and limit exemptions, because the vast amount of “the rich” are already paying more than their fair share. But not everyone agrees.
Bob McIntyre, director of the liberal Citizens for Tax Justice, says that the federal numbers do not tell the whole story. According to McIntyre, the top 10 percent pay just under half of tax revenues when state and local taxes are accounted for…
“The vast majority of income gains have gone to the people at the top,” he said.
This is another trick politicians and biased media will use to pretend “the rich” is an enduring class. The top 10% who pay 70% of the taxes, includes people who earn just $114,000 a year and up, according to the Heritage blog. This means that a couple who recently retired and sell their home can easily be in the top tax bracket. Even though homes are relatively cheap right now, when compared to a few decades ago, houses are much more expensive, explaining why the top 10% is earning more money these days. A house that cost $30,000 in 1970 may cost $300,000 today, while the average income has not risen at the same rate as housing prices. So the sale of a house today can easily put you in the top 10% of earners, while a sale of a house in the 70’s could easily not put you in the top 10%. Because of this reason, and similar situations, the top 10% takes home a larger share of all income. It is important to remember however that the top 10% does not consist of all the same people from year to year.
Incentives are a big part of how people operate. When the incentives to earn are reduced, people will earn less. That is why raising taxes can lead to less revenue in the end, because people will earn less. Likewise lowing taxes will increase the incentive to earn, meaning more tax revenue could be collected.