Fair Share?

President Biden and the Democrats love to say that "the rich" are not paying their fair share of taxes.

They want voters to believe that if the wealthy would just "pay their fair share" of taxes that everything would be well with the federal government budget.

What is a fair share? How is it determined? Who decides what it is?

The Internal Revenue Service recently released taxpayer data for the 2021 tax year.

The data indicates that the top 1% of income earners paid 46% of all income taxes in 2021.

The top 5% paid 66%.

The top 10% paid 76%.

The top 50% paid 98%.

The bottom 50% paid 2%.

Income Tax Distribution By Income Level
IRS Statistics of Income (2021 Returns)

The United States income tax system is designed to be progressive meaning that the rich should pay more of their income than those with lower incomes.

However, how much more?

You can see from the above chart that the Top 1% of income earners had 26% of the total income in the United States but paid 46% of the total bill.

Their share of taxes is 1.77x their share of income? Is that fair?

The share of taxes for the top 10% is 76% compared to a 63% share of income.

Their share of taxes is 1.21x more than their share of income.

On the other hand, the bottom 50% is only paying .22x in taxes compared to their income.

Is that fair? Should the bottom half be getting away by not paying more if the rich are being asked to pay more?

The fact is that the share of income taxes paid by the top 1% earners in the United States has been increasing continually since 1980 when marginal tax rates were first reduced by Ronald Reagan.

In 1980, the top 1% were paying about 19% of all income taxes. In 2021, they paid 46% despite the reduction in the tax rates across the board over the ensuing years.

Lower tax rates have seemingly incentivized more income that has resulted in more tax revenue.

Source: https://nypost.com/2024/02/29/us-news/data-prove-it-the-trump-tax-cuts-soaked-the-rich/

Note that the share of income taxes the top 1% paid surged after the Trump tax cuts despite the fact you often hear Biden and the Democrats claiming that those tax cuts were a giveaway to the rich.

The truth is that the Trump tax cuts disproportionately benefited the middle income taxpayers just as was intended in the legislation.

You simply could not have the dramatic increase in the share of taxes paid by the top 1% shown above if that was not the case.

Source: https://thehill.com/opinion/finance/584190-irs-data-prove-trump-tax-cuts-benefited-middle-working-class-americans-most/

Income data published by the IRS clearly show that on average all income brackets benefited substantially from the Republicans’ tax reform law, with the biggest beneficiaries being working and middle-income filers, not the top 1 percent, as so many Democrats have argued.

Of course, if there is one thing that should be obvious to anyone who is familiar with the workings of our federal government is that no matter what the level of income taxes are it will never be enough.

Witness where the federal government is right now.

It is currently estimated that the federal budget will run a $1.9 billion deficit for the 2024 fiscal year ending in September.

This is despite record high income tax collections.

Income tax collections this year are +6% higher than last year.

It took 222 years for the United States to accumulate $11 trillion in debt.

This debt was used to pay for the Civil War, two World Wars, and the Louisiana Purchase. It was used to build the interstate highway system, the Hoover Dam, the Tennessee Valley Authority and put a man on the moon and countless other projects.

In the last four years alone, the federal government has added $11 trillion to the federal debt.

Do we really have anything that we can point to that can make us feel as if taking on this debt is going to produce long-term benefits to the American people?

The Biden administration would be quick to answer that the "green investments" they are making would be examples where those investments financed by debt will produce future returns.

However, considering this recent example, color me a little skeptical on that score.

Exactly EIGHT electric vehicle charging stations have been built over two years after legislation was passed that was going to put chargers across the width and breadth of the United States.

It should also be noted that last month (February, 2024), 63% of all federal income tax revenues were needed just to pay the interest on the $34.5 trillion federal debt.

If you have to pay the interest on the federal debt first, and it is consuming over half of your income tax revenue,  that does not leave much for anything else.

Source: https://twitter.com/RealEJAntoni/status/1767622355294048486

For the full year, interest on the debt is projected to consume 43% of all individual income taxes.

To put the entire "the rich need to pay more taxes" argument in perspective, even if the income taxes paid by the top 1% were increased by 50%, the federal budget deficit would still be $1.4 trillion for this year.

Make no mistake, a financial reckoning is ahead.

Top 1%? Top 50?  Bottom 50%?

It does not matter where you are.

When the federal spenders have their backs to the wall, everyone will be accused of not paying their fair share.

And that day is getting closer every day.