Why the Rich Paying a Majority of Taxes Should Still Anger the Lower Economic Classes

Another article appeared on CNN Money today telling the same story that has been told repeatedly for quite a few years now: the rich pay the biggest share of taxes to the federal government.  The article does point out there is more to the story than meets the eye but it doesn’t even begin to try to tell it all.  Some points to note:

In fact, the Tax Policy Center found last year that there about 4,000 households with incomes over $1 million that were not paying anything at all…When factoring in state and local taxes, the top 10% pay just under half the tab. And when calculating tax burden as a percent of income, the tax code is even less progressive. The top 10% paid an average of 30% of their income in local, state, and federal taxes in 2011, said McIntyre. That’s not much different than the 25% percent paid by the middle class.

There are two key reasons people should be angry about the idea of the rich paying a higher share of the tax burden.  The first is the simple fact they are paying a higher share because income inequality has exploded over the past three decades.  There is a graph showing the share in taxes paid in the CNN article since 1986.  The graph may be a nice point for the right wing argument on this debate, just so long as you don’t show another graph beside it portraying the increase in income inequality over the same period.  Kind of like the one I’m including.

If you don’t understand what is happening, your math skills may need some sharpening.  Let’s say you have two people, we’ll call them Smonald Frump and Everyday Dude.  Frump makes $250 in 1986 and pays $55 in taxes.  Dude makes $200 and pays $45.  In 2013, Frump makes $30000 and pays $70 in taxes.  Dude still makes $200 and pays $30.  Yes, Dude’s taxes have gone down but so has Frump’s and they have gone down by a bigger percentage (which is what has happened in this time frame).  Dude’s income has also stayed level while Frump’s has skyrocketed (which has also happened when adjusted for inflation, graph included).  Who makes out better in this scenario? 

The second reason for anger is the fact that even if rich people are paying their taxes, corporations are not always playing along and performing their patriotic duty.  There are plenty of articles covering this reality, such as this one giving this fact:

CTJ (Citizens for Tax Justice) calculates that if the companies had paid the full 35 percent corporate tax rate, they would have put more than $78 billion into government coffers.

(You will also see this article notes campaign donations by these companies to politicians.  Plenty of R’s and D’s by those names to go around for everyone.  And by everyone I, of course, only mean the top %1 since that is what matters to them.)

Here’s another article with more juicy bits of info:

Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That’s the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008…Companies paid just $181 billion in federal corporate taxes in fiscal 2011, about 8% of the $2.3 trillion in total revenue collected by the federal government. That’s down from 15% of the total in 2007. Individuals, meanwhile, paid $1.1 trillion in income taxes last year.

Delicious!  One more with this example and a pretty slideshow:

The 10 most profitable U.S. companies paid an average federal tax rate of just 9 percent last year…Some of these companies paid more than 9 percent — JPMorgan earned $26.7 billion in 2011, for example, and paid $3.7 billion of it, or 14 percent, to the federal government — and some paid less, like Exxon Mobil, which only sent 2 percent of its $73.3 billion earnings to the IRS.

The argument that the rich pay a higher share of the tax burden now than they did 30 years ago should not make the people on the lower rungs of the economic ladder happy.  It should be infuriating, particularly when the reasons for the change are noted.

But hey, Wall Street is hitting record highs and that will not expand the problem of wealth inequality at all so we are all doing well and the job market is back to normal, right?…Right?

Nope.