With the American economy slow to gain traction amid alternating positive and negative news, President Bush has greeted the new year with an economic stimulus package, which is centered around tax cuts. Naturally, with the President’s words still in the air, and the ink still wet on his outline, some are already deriding the President’s tax cuts with claims that it’s for the rich, and that “working Americans” are going to get soaked.
Before we get caught up in the class warfare crossfire which typically becomes the focus of any debate on taxation, let’s establish just who pays the taxes in this nation. According to the Internal Revenue Service, the top 50% of wage earners in America pay 96% of the income taxes. This means the bottom half of earners pay just 4% of the taxes. Who is the top 50%? Those individuals or couples filing jointly who earn at least $28,000. That’s not exactly rich.
And what about the myth that the wealthy don’t pay their fair share? Again, according to the IRS, the top 1% of wage earners, who bring in 21% of all income, pay 37% of the federal tax burden. (Under a truly “fair” system, they would pay 21%.) On the flip side, the bottom 50% of wage earners bring in 13% of the income. Applying the same logic, under a fair tax system, they would pay 13% of the taxes — not the 4% they pay now.
So when we discuss across-the-board tax cuts (which is how tax cuts should be applied in order to benefit all taxpayers), who should save the most money? Those who pay the most money. If you pay a lot into the system, you should save a proportionally larger share than one who pays only a little. And if you pay no taxes, then you save nothing. Allow me to run a simple illustration. Let’s say John pays $10,000 in taxes. Alice pays $1,000. Charles pays $0. A 10% across-the-board tax cut would save John $1,000, Alice $100, and Charles $0.
Now let me illustrate how this scenario would be spun by some politicians. “Under the Bush plan, the wealthy would save enough to purchase a new laptop computer, while the middle class would save just $1.92 a week — not even enough to buy a Big Mac. And the working-poor would save nothing. Not one dime.”
If you think I’m exaggerating, read what Senate Minority Leader Tom Dascle had to say in a radio address on January 4. In trying to bait the American people, Dascle claims that such a tax cut would be “the wrong idea at the wrong time to help the wrong people,” and that “those who make more than $1 million a year would get a tax break of $24,000, while those who make between $40,000 and $50,000 a year would get a break of $76.”
What Mr. Dascle didn’t say was that the top 1% (those who earn at least $313,000) also pay an average tax rate of 27.45%. This means that those who make more than $1 million a year are also paying at least $274,500 in taxes. That’s a whopping sum of money to have taxed out of your paycheck.
Opponents of the President’s plan instead argue that tax cuts should be aimed at lower- and middle-income families. As a middle-income wage earner myself, I would love another tax cut, but I’m not so selfish as to demand that I and no one else should benefit. The faulty logic embraced by Dascle and other like-minded politicians would further erode the bottom of the tax base in America.
By increasing the pool of citizens who pay little or no taxes, we are shifting the burden of funding the government onto the shoulders of fewer and fewer people. And we are quickly approaching the day when the majority of workers will pay no appreciable taxes, and will therefore not care whether Congress passes a tax cut or a tax increase. This would produce the troubling scenario of politicians getting elected solely on promises of greater entitlements to those who pay no taxes — a group of Americans that would constitute a majority of the voting population, and yet would have no vested interest in how government gets funded.
I have a moral problem with this. I believe it is unjust for one group of Americans to have the power to vote money out of the paychecks of a separate group of Americans. Regardless of how much money one earns, if he is part of this society, uses our roads and sends his children to our schools, then he should contribute something, no matter how small a sum. Only then can we all fully appreciate the fruits of the taxes we pay. And we can all hold our politicians accountable for the amount of money that is taxed, and for the quality of their stewardship.
