Truth About Taxes

There is no issue that Kamala Harris and the Democrats demagogue more on than the subject of taxes.

Here is what Kamala Harris said on 60 Minutes this week in an interview with Bill Whitaker when questioned about how she planned to pay for her spending plans.

"Well, one of the things I'm going to make sure that the richest among us who can afford it pay their fair share in taxes. It is not right that teachers and nurses and firefighters are paying a higher tax rate than billionaires and the biggest corporations. And I plan on making that fair."

She says that Donald Trump blew up the federal deficit with tax cuts for the rich.

We often hear that the Trump tax cuts that were passed in 2017 only benefited the rich.

She says that billionaires pay a lower tax rate than firefighters nurses and teachers.

She says that she is going to make sure the rich pay their fair share so that she can pay for her liberal fantasies.

Let's consider some truths about taxes.

Did Donald Trump cause the deficit to rise because of tax cuts?

The truth is that federal tax revenues increased from $3.32 trillion in fiscal year 2017 (the year before the Trump tax cuts took effect) to $4.90 trillion five years later in fiscal year 2022.

That is an increase of almost 50% in revenues over the five-year period.

How many Americans saw their personal incomes increase almost 50% over that time?

What about federal spending?

Federal government spending was $3.98 trillion in fiscal year 2017.

By 2022 it had grown to $6.27 trillion. This was actually down from the $6.55 trillion it was in 2021 due to Covid spending. However, even now that we are beyond Covid, spending in 2024 is going to come in at close to $7 trillion.

We are currently looking at $2 trillion annual federal deficits for as far as the eye can see.

How can Kamala Harris and the Democrats say that the Trump tax cuts blew up the federal deficit?

The truth is that increased spending, inflation and interest rate increases on the federal debt (due to inflation) have been the primary reasons that the federal deficit has grown.

The Biden/Harris agenda has contributed far more to the budget deficit than any Trump tax cuts.

Did the Trump tax cuts only benefit the rich?

Nothing could be further from the truth.

In the first full year of the Trump tax cuts an analysis of the IRS data showed the following.

Taxpayers with adjusted gross income (AGI) of $15,000-$50,000 enjoyed an average tax cut of 16%-26% between what they paid before the Trump tax cut and what they paid after.

Taxpayers with AGI of $50,000-$100,000 received an average tax break of 15%-17%.

Those earning $100,000-$500,000 received an average tax cut of around 9%.

The average tax cut for those earning $1 million or more was less than 6%.

Do billionaires pay a lower tax rate than the middle class?

Let's look at the latest data on the projected distribution of income, taxes and average tax rates for 2024 as compiled by the Joint Committee on Taxation.

A few truths from that data.

* On incomes below $60,000 the average income tax rate is negative. These taxpayers are getting more back from the federal government in refundable tax credits than they are paying in income taxes.

*The average income tax rate for those with incomes between $60,000-$80,000 and $80,000-$100,000 (the likely incomes levels for most teachers, firefighters etc) is 1.5% and 2.7% respectively.

*The average income tax rates for those with incomes of $1,000,000 or more is 24.8%---10 times the average income tax rate of those middle class teachers and nurses.

*The most obvious measure of paying a "fair share" of income taxes would be calculated in such a way that the share of taxes collected would be equal to the share of income of each income group. For example, a group earning 10% of the income would logically pay 10% of the total taxes. 

However, under the current income tax system in the United States, for all income groups below $200,000 their share of income taxes is less than their share of income. Such is the case with the progressive income tax system we have. The tax rate increases at higher levels of income.

For example, those earning $1 million or more per year have 15.5% of the share of income but are paying 39% of the income tax burden.

Those earning $500,000 or more have 23% of the share of total income but are paying 54% of the total income tax burden.  

The top 2% of income earners are bearing 54% of the federal income tax burden.

What is a fair share?

*Even if the taxes on millionaire earners were doubled it would only bring in $800 billion in added revenues.  That is not even equal to half of our current annual budget deficit. Kamala says that she is only going to raise taxes on BILLIONAIRES. The math simply does not work unless she is intent on confiscating most of their wealth.

* I also found it interesting in looking at the data that it is projected that 1 million tax returns are expected to be filed in 2024 with incomes of $1 million or more. I don't know that there could be a better testament on the privilege it is to live in a country founded on capitalism and the free enterprise system than that statistic.

That is equal to 0.6% of all tax returns filed.

Put another way, in a city where 10,000 tax returns are filed, 60 would have incomes greater than $1 million. 

Where is this possible anywhere else in the world than the United States of America? 

Considering all of the above, how is it that Kamala Harris and the Democrats can claim that billionaires are paying a lower tax rate than those in the middle class?

The only way they can do it is by counting unrealized gains as income. Of course, the increase in value of shares of stock, a home, a farm or a piece of art is not income. However, the Democrats want to pretend it is. More than that, they actually want to start taxing these unrealized gains as income.

Biden/Harris had previously proposed a minimum tax of 20% on the unrealized "income" of billionaires in their 2024 budget request to Congress. 

For example, a tech founder owns $1 billion in stock and the stock increases in value to $1.5 billion during the year, they would owe a tax of up to $100 million on the $500 million paper gain – even if they didn’t sell a single share.

Of course, where do they get the cash to pay the tax if all of their wealth is wrapped up in the stock?

What if the stock goes down in price the next year?

How do you even calculate the unrealized gains in privately-held stock, or art or real property each year without a subjective and expensive appraisal?

The truth is that administrative complexity is a major reason that UNREALIZED gains are not considered income under the Internal Revenue Code. This is also the norm around the world 

France instituted a wealth tax in 2000. It eventually led to the exodus of 42,000 millionaires from the country and French President Macron eliminated it in 2018. All that remains is a real estate wealth tax that only applies at rate of .5%-1.5% on real estate values above EUR 1.3 million.

One of the other reasons is that taxing such gains would likely be UNCONSTITUTIONAL (See my discussion of this topic in a blog post I wrote in 2019, "Wealth Tax-Unworkable and Unconstitutional" when Bernie Harris and Elizabeth Warren were pushing the same agenda that Harris is in taxing wealth rather than just income.)

However, obeying the Constitution is not something Biden and Harris have considered an obstacle in the past (e.g. student loan forgiveness, suppression of free speech, etc.)

It is also apparently lost on Biden, Harris and the Democrats on what such a "tax the rich" system would do to create disincentives to creating further wealth and opportunities for the public at large.

The truth about taxes when it comes to Democrats is that no matter what anyone pays it is never enough.

The truth is also that any new tax is always just going to be imposed on "the rich''.

That is the case until those taxes are also not enough and the new tax is soon applied to everyone.

Watch your wallet.

It most assuredly will not be safe if Kamala Harris has anything to do with it.

That is real truth you can believe in.