The Question Is Not Whether We Want “Class Warfare”? — It’s: Can We Have “Tax Fairness”?

It always makes me laugh to see the video clips, one after another, ala Steven Colbert, showing vocal Republicans all speaking from the same page. The latest mantra:

  • “It’s class warfare,”
  • “It’s class warfare,”
  • “It’s class warfare,”

— Paul Ryan, John Boehner, Eric Cantor, Mitch McConnell, and many others, — all repeating the same party line.

This all in response to President Obama’s proposed “Buffett Rule” — named after the zillionare that suggested it — that the very rich should pay their fair share of taxes. As Timothy Noah says, “Obama isn’t even talking about making the rich pay a higher proportion of their income than the middle class in taxes. God forbid! He’s merely saying (with his proposed “Buffet Rule”) that the rich shouldn’t get away with paying a smaller proportion.”

Says Noah, “As recently as 2000 the 400 richest Americans paid 22.3 percent of their adjusted gross income in federal taxes. In 2008 (the last year for which data are available) they paid 18.1 percent. Again, this occurred while their income share was going up, not down.”

Paul Krugman prepared this chart from data from the Congressional Budget Office — that only goes to 2005, but shows a trend that today would be even more dramatic — that shows that changes in tax laws have greatly favored the wealthy. Because of changes in tax laws, an average income may have an increase of 4% in after tax income, but the very wealthy have a 20% increase.

Krugman makes the point that “across the board” tax cuts have greatly favored the wealthy, the same point that I attempted to make three years ago, concerning the 2005 law reducing Ohio’s income taxes: Ohio’s 2005 Tax Reduction Law Diminished, By 21%, The Progressivity of Ohio’s Tax Code.

It’s a simple principle applied many times. Suppose the wealthy were paying at a 40% rate, and the poor at a 10% rate — a tax cut of 50% would increase after tax income for the wealthy by 20%, but give the poor only 5% more.

One of my aggravations with Governor Strickland was that he didn’t push a progressive tax system. When he got into office in 2006, I felt he should have made a stand and challenged Ohio’s 2005 Tax Reduction law. A big reason Ohio is now in financial straits is that, with the passage of this law, the state’s income tax is much less progressive than it once was, and therefore producing much less income. On top of that, today’s Republicans have now abolished the estate tax, again, greatly favoring the wealthy.

Not only have tax changes favored the wealthy, but the income of the wealthy continues to rise. This is an interesting chart copied from a web-site that studies the distribution of wealth world wide:

The Question Is Not Whether We Want “Class Warfare”? — It’s: Can We Have “Tax Fairness”?

The Republicans are trying mightily hard to frame the question of seeking “Tax Fairness” as somehow a question of class resentment. They have no shame.

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5 Responses to The Question Is Not Whether We Want “Class Warfare”? — It’s: Can We Have “Tax Fairness”?

  1. Rick says:

    The top 50% of taxpayers pay virtually all of the income tax. That is not fair. Poor people get great benefits from their governments. The drive on the streets, use heavily subsidized mass transit, use ambulances, are protected by the military, etc. It’s time they pay their fair share of taxes. Once you get the majority of people not paying taxes it is like 4 wolves and 3 sheep voting for what is for dinner.

  2. Mike Bock says:

    Rick, this article was mostly about the “Buffett” rule that deals with the income tax. The idea is that, in order to make our tax system more fair, a wealthy person like Warren Buffett should pay income tax at a rate that is at least as high as the rate his secretary pays.

    Your point, that “the top 50% of taxpayers pay virtually all of the income tax,” only gives a small part of the data that should be used to analyze whether our present system of taxation is “fair” or not. To analyze the fairness of the system, you need to look at the big picture and consider not just income tax, but all taxes. When you add social security tax, sales tax, license fees, property tax, etc., you’ll find that, overall, our tax system is regressive — meaning that, generally speaking, a smaller income is required to pay out a bigger percentage of total income in taxes than the percentage paid by a larger income. In some states even food is taxed.

    What does it mean to be fair? I think it is important that the question of “tax fairness” be analyzed and debated. But to do that, we need to look at the big picture, not simply one part of the picture — the income tax. It takes a lot of effort to amend the constitution. But, when the 16th Amendment was passed, in 1913, there was an overwhelming consensus that in the interest of fairness there should be implemented a “progressive” income tax, to even out the total tax picture. The fact is, regardless the top 50% of taxpayers pay virtually all of the income tax — because of tax cuts, tax give aways and loopholes — our total tax system is still regressive and needs reform. Progressives from 100 years ago would argue that in a fair tax system, Warren Buffett should be paying income tax at a higher rate than his secretary, not simply the same rate. The changes in the tax code suggested by President Obama are too weak.

    If we are interested in tax fairness, it seems to me, progressive taxation — where higher incomes pay at a higher rate — still makes sense. “Progressives” worked hard to enact the 16th Amendment. It is interesting how history is forgotten. It is amazing that the propaganda machine of the “Money Party” has convinced many of the descendants of those Progressives, of 100 years ago, that, contrary to the fervent belief of their forefathers, a “flat” rate for income tax, supporting a regressive tax system, is more fair than a progressive rate and a progressive system. I hope we don’t have to return to the economic devastation of the early 20th century in order for average people, who have forgotten history, to support tax fairness.

  3. Rick says:

    Mike, first of all, the social security tax should not be counted on as a tax because it pays ouy 90% of the average indexed monthly earnings to lower income workers. This is far higher than the next group which get 32%. So the social security tax is a savings plan for those lower income employees. For the higher brackets it is both a tax and a small savings account.

    You have no problem with the lower income folks paying no income tax. What should the federal income tax be for those who earn over $250,000 for a married couple? Remember they pay state income tax, sales tax (a lot more as they buy a lot more), real exstate tax, etc. Should the top 10% pay all the income tax? Top 20%? How high do you think that the income tax could go before the rich begin to leave?

  4. Mike Bock says:

    When the income tax first started, only the vary wealthy were taxed — maybe only 5 per cent of all wage earners — it was all about “soaking the rich,” as a means to make for overall greater fairness in our country. The tax rate for the highest incomes was much greater 30 years ago, pre Reagan, than now, yet there was not an exodus of the wealthy. The questions that need to analyzed and debated are question like these: “What are the public policies that will lead to the most fair society possible? What policies are most likely to promote the general good? What policies will best help us as a nation to achieve the ideal we ascribe to of making a society where there is liberty and justice for all?”

    We need to acknowledge that our republic is simply not working to accomplish it’s ideal for large part of it’s citizens and trends for the future seem even worse. More of the same — trickle down economics, etc — only louder and with more fervency is not a reasonable response. Liberals have failed to present a thoughtful vision of the future, and what libertarians and conservatives have to say seems hopelessly naive and out
    of touch with reality.

  5. Ice Bandit says:

    …so libertarians are naive and unrealistic? Perhaps the reason libertarian ideas are currently in the ascendency is because folks have witnessed the financial and intellectual bankruptcy that follows 50 years of liberalism…

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