Monday, August 6, 2012
Wall Street Journal: Taxing the Rich -- The Facts:
President Barack Obama says someone has to pay more taxes if the U.S. is to tame its budget deficit and provide the government he thinks the nation needs. He proposes that the best-off Americans pay more. It's only fair, he says.
"There are a lot of wealthy, successful Americans who agree with me because they want to give something back," he said in a speech in Roanoke, Va., that set off dueling campaign ads. "Look, if you've been successful, you didn't get there on your own."
His Republican opponent, Mitt Romney, counters that the deficit can be reduced without raising taxes if Washington is tough on spending. He thinks raising taxes on the best-off would be unwise and unfair. "President Obama attacks success, and therefore under President Obama we have less success," he said.
The contrasting comments underscore philosophical differences over the roles of the individual and society. But the most tangible disagreement is on taxing the rich.
"Who's right: Obama or Romney? Both. Or neither," says Joseph Thorndike, a tax historian. "When it comes to taxing the rich, there is no single, objectively correct answer. You can talk all you want about asking rich people to pay 'their fair' share,' but don't kid yourself. You're just trying to turn private opinions into public policy." "I'm struck" he adds, "how the facts can be used selectively by either side."
Academic tomes have been written about revamping the tax code so it finances the government while doing less damage to economic growth. But, countless congressional hearings later, the U.S. is no closer to a consensus on "fair share" than when the income tax was born 100 years ago. ...
Over the past three decades, Americans—including most of the rich—have paid less of their incomes to Washington. Top earners have received more of the income and paid more of the taxes; a growing number at the bottom have paid less or, in some cases, nothing. Whether that is fair is a question of politics and values. Facts can inform the debate. Here are a few salient ones:
- The top 5%, top 1% and top 0.1% of Americans have been getting a bigger slice of all the income and paying a growing share of federal taxes.
- Average tax rates have come down for everyone. On average, the tax bite on the rich is bigger—except for those whose income mainly comes from capital gains and dividends.
- The share of taxes paid by the bottom 40% of the population has been shrinking along with their share of income.
- The tax system narrows the gap between economic winners and losers, but not enough to stop the gap from widening.
[W]here does that leave the question of "fairness?" "It's not resolvable scientifically," says Mr. Thorndike, the historian. "It's only resolvable by a show of hands."