The Problem of Making the Rich “Pay Their Fair Share”

By Andrew L. Sullivan

Frequently you will see a letter to the editor or some pundit on television calling upon the rich and wealthy to pay their “fair share”. But what does this really mean?

As far as mere numbers, the wealthy already pay more than their fair share. According to the Heritage Foundation, the top 20 percent income earners paid 81.2 percent of the incomes taxes the Federal government received. This took place after the Bush tax cuts.

Translation, if the top 20 percent died or simply decided to take a vow of poverty, the Federal government would lose over 80 percent of the income taxes it collects.

Think about it. What would happen if we took the progressive income tax strategy to paying wages. If you work up to 30 hours a week, you earn $10 an hour. Work up to 40 hours, the additional hours earns you $8 an hour. Work up to 50 hours, the additional hours earns you $6 an hour. And more than 50 hours, those additional hours you receive nothing.

Who would work more than 30 hours? You would get a second job to maintain the $10 per hour pay. The rich make money by effort, not magic. They work hard for it and if we tax them at much higher rates, they will either stop producing or move to countries like Russia, where income tax is a flat 13 percent.

Think of the local medical surgical facility making more than $250,000.  What if a surgeon is making so much money but being taxed more, feels no guilty in cutting back on the number of surgeries he does, and taking Friday off to play more golf? Can your heart surgery or brain surgery put up with a doctor taking more vacation days to avoid taxes? These are the sort of questions the left wing idiots fail to ask but your life is on the line because they want to tax the rich “more”.

If America wants to prosper, create a 5 percent flat tax with no deductions on incomes up to the first $75,000 earned with further earnings being tax free. This will encourage everyone to become wealthy and reduce dependency on government. Liberals will scream it is regressive, but they never complain about the Social Security tax which is a flat tax made regressive by a cap at about 113 thousand dollars. Also, the same “tax the rich” crowd are fine with sending Social Security checks to millionaires and billionaires.

15 comments

  1. CapedJA says:

    Mentioning “the top 20 percent income earners paid 81.2 percent of the incomes taxes” without ever mentioning their percentage of total income is such a tremendous oversight that I question both the writer’s intellectual capacity and/or honesty and those of the editorial staff here for publishing it.

    What would happen if the top 20% decided to “go Galt”? What a wank of a question.

    That your “solution is to “… create a 5 percent flat tax with no deductions on incomes up to the first $75,000 earned with further earnings being tax free.” Further shows that anyone taking this piece seriously should probably be checked out for brain trauma.

    Every time I come back to this site, I am simply saddened that this is what passes as political discourse in our state.

  2. Sasha says:

    CapedJA- This blog is probably the most balanced in the state however every so often the tin foil hats come out and the right wing propaganda machine is in full force. How about commenting on basic needs income and the disproportionate effect on that?

  3. Mike Weaver says:

    I think the biggest Economic problem we face is NOT the rich paying their share! The real problem is Nafta, Ndaa, etc. that allows big Corporations to move jobs out of this country without a terif, I say lets go back to the good ole days when if you wanted to bring in ANY foreign goods, you paid a high tax for bringing it in! Let’s go back to making it more affordable for these guys to manufacture products in AMERICA again! This will fix the problem, as soon as it becomes too expensive to exploit the worlds largest consumer group, They will bring the jobs back! I know, People will say it won’t work, well Money talks, these guys will bring them back! Some profit is better than none! Greed and corruption in DC. is the problem, NOT the rich!

  4. Emerac says:

    This is the dumbest thing I’ve seen in a long time. The analogies are, well…not analogous. The progressive wage analogy has a number of deceptive pieces.
    1. The baseline of $10 makes it seem as though it would be difficult to get along with significant reductions in wages. For that surgeon, for example, to be making $250k/yr at 30 hrs/week, s/he would be making $160/hr. Tell me, is reducing your wages 20% from $10/hr to $8/hr the same as reducing them 20% from 160 to 128? The point of the progressive income tax is to allow individuals a lower tax rate on the initial income they need to get by. Do you still feel the same way about this person?
    1. It is absolutely dishonest and utterly asinine to present a new income bracket as having a 20% tax increase. If, to stick with your original flawed example where a $10/wage would be able to somehow incur multiple tax brackets with only a slight increase in hours, the next tax bracket would only be an increase of 5% on new taxes. If a new tax bracket began at $15,600 ($10/hr*30hr*52wk), each additional hour would be taxed at 5% more, meaning the person would keep $9.50 for the additional hours. The aforementioned surgeon would be keeping $152 for each additional hour, rather than $160.
    3. The analogy presents tax brackets as being unreasonably close. For 2012, tax brackets fell at 8,700, 35,250, 85,650, 178,650, and $388,350. Does anyone have the luxury of making so much money that a few more hours a week will push them into a new one?
    4. All of these factors lead up to the most dishonest part of all…the idea that a new tax bracket would make someone choose to just not work. Who in their right mind would chose not to work because additional hours would net them 5% less than the previous hours? Show me someone who would complain that an additional hour would net them $19 instead of $20/ hr or $66.50 instead of $70/hr.

    You know, I hadn’t read this blog in quite awhile, but I thought I’d give it another chance. I had hoped this blog would be a good source for diverse points of view in Nebraska.I come back and find this load of garbage passing as political discourse. This article is unfit to print — it’s either intellectually lazy and outright dishonest. I don’t suppose I’ll be coming back.

  5. Mike Weaver says:

    Unsure how many will care, but I found an interesting tid bit on Tarrif’s in the Constitution. I am a ” Paul Bot ” as many know, and I do believe most of the answers to current problems are in the Constitution, just like many of the answers to our Moral problems can be found in the Bible, After all they do have the same Author….In my humble opinion.

    Why did we remove Tariffs when its part of our Constitution?
    Our founding fathers put tariffs so that we could protect American businesses from outsiders who subsidized their companies. George Washington was extremely adamant on this. Just look at this and see what I mean.

    The Tariff Act of 1789 (1 Stat. 24), signed into law by President George Washington on July 4, 1789, was the first substantive legislation passed by the first Congress. This act, together with the Collection Act of 1789, operated as a device both to protect trade and to raise revenues for the federal government. The constitutional authority for the act is found in the powers given to Congress “to lay and collect Taxes, Duties, Imports and Excises” and “to regulate Commerce with foreign Nations.” Among other things, the act established the first schedule of import duties and created an additional duty of 10 percent on imports carried on vessels “not of the United States.”
    U.S. TRADE POLICY

    The specific provisions of the act are of little interest (by 1799 it had been superseded by subsequent, more detailed legislation). However, the act remains significant for setting the basics of U.S. trade policy. In supporting its enactment, Alexander Hamilton argued that tariffs would encourage domestic industry. Other nations offered their industries significant subsidies, or money given by a government to support a private business. Hamilton contended that a tariff would protect U.S. industry from the effects of these subsidies. (Concerns over “dumping”—imported goods sold at less than their fair value to gain unfair advantage over domestic goods—would also be addressed in the Tariff Act of 1816.) Another argument in favor of tariffs is now easy to forget. Before the income tax was authorized by the Sixteenth Amendment in 1913, the tariff was a key source of federal revenue. Thus, for over a century import duties (along with domestic excise taxes) were the major source of government revenue, with sugar duties alone accounting for approximately 20 percent of all import duties.

  6. Ken Schoolland says:

    Mr. Sullivan’s point about the negative impact of taxes on incentives to work is rock solid economics. As taxes rise, taxpayers have an incentive to work less, to hide their income, to move to lower tax regions, and to rebel. Most everyone changes their behavior at high tax rates, though each person has a different breaking point. The American Revolution, the French Revolution, and the Japanese Rice Tax Rebellion were all sparked by those who had a lower toleration to what was perceived to be “tax slavery” than others of their countrymen. What amazes me is the effort made by those commenting in this blog to disparage this notion. Mr. Sullivan’s idea is that producers have a right to what they produce. Those who disparage him seem to be trying to make the case that tax collectors have a right to what others produce. Ironically, to empower government taking simply makes it easier for those with political influence to take from both the rich (because they have more to take) and from the poor (because they are powerless). Political insiders have the most to gain by government power, not the poor. The poor have the most to gain by an economic system that provides the best incentives to produce wealth.

  7. Everyone wants to engineer the economy. Like any social engineering, it simply does now work. Humans are too imaginative to lend themselves to social engineering.

    And as fluid as our personal behaviour can be, human nature itself is immutable. We cannot be “engineered”, and such efforts always result in a turn toward tyranny.

    That included protectionist measures, such as high tariffs.

    Why don’t we have the unspoken conversation, at long last? The one about our nature and our relationships with one another. Then we might start developing a mutual understanding and a way forward.

  8. I want to thank everyone for responding to my article. I wish to clarify some points.

    CapedJD took issue with me for not referring to the total income and taxes as a percentage. However, the percentage is not how government views incoming revenue. My suggestion of a 5 percent tax is similar to how the Social Security tax actually operates. The taxpayer making $10,000 a year would pay $500 and the taxpayer making $100,000 would pay $5,000. No matter what, the person paying $5,000 is more important than the person paying $500 as far government is concerned. When the Federal Income tax began, the highest bracket was merely 7 percent but since then, tax brackets have gone up and a system of payola and bribery has emerged in the form of tax deductions and tax credits. Often for rich persons, these deductions have the same impact on them as using coupons in a grocery store does for the rest of us.

    As for John Galt comment, I can understand why people in Nebraska may not take the argument of cutting back on work or leaving the country seriously. However, it only takes small minority of talented rich people to decide to give up and go look for greener pastures. When there are plenty of countries like Bahrain which has no income tax, the wealthy do have many options to avoid taxes and get paid for what they think their talents are worth.

    Emerac took issue with the numbers I presented. I provided such numbers for illustration purposes only, not for mathematical and numerical equivalence. The analogy still fits whether I use $10, $8 and $6 or $10.00, $9.95 and $9.90. People working expect more when they put in more hours. They expect benefits and when going over 40 hours, they expect time and a half. Many people love doing overtime but know their limits they may do 10 or 15 more hours for a few weeks but they reach their limit. Others will only put in just enough hours to get full time benefits and will never work a second more. The same is true of the wealthy people making millions. After so much taxation, they eventually burnout burn out on the work and decide to cut back or do something else and their heavier taxation encourages them to do so.

    Mike Weaver brings up some interesting nativist sentiments which I find alarming. Corporations have been pushed out of the United States due to corporate taxation. Subsidies should be ended, but taxation must also be lowered. But it is not just corporations, but also American labor that has been taxed to death for Social Security, Medicare and Medicaid. There is a 15 percent tax gap paid jointly by employers and employees which stagnates the US economy.

    Weaver mentioned tariffs and while these can fund government, high tariffs encourage war. Washington and many others in northern colonies favored higher tariffs thinking it would protect their industries from British competition but the southern states opposed such high tariffs as it impeded their ability to trade. The conflict over tariffs fed some of the conflict which lead to the civil war. If Christian English abolitionists had not been so adamant in their opposition to slavery, Britain may have sided with the Confederate States. Many people of a libertarian mindset forget the value of free trade and the necessary military might to defend it. President Thomas Jefferson learned it the hard way in the Barbary Wars.

  9. Mike Weaver says:

    Tariff’s will start war? I highly doubt that analogy. If it were more expensive for General Motors to build OUTSIDE AMERICA and bring across the border, then General Motors would build them here and take the loss! Do you really believe that General Motors would quit building cars? Even if they did, Another company would build them and more People would be working at a decent living wage, thus paying more taxes, and creating more jobs, thus paying more taxes, it’s really a vicious circle of recovery in my humble unedumacated opinion. General Motors ONLY builds in South America because of the cheap labor and NO safety restrictions, it is pure greed nothing else! Bring back the tariff’s and the jobs will come back, AMERICA is the only country abiding by the ” Free trade agreements ” anyway! Plus we are already in an endless war, how could it get worse? We may be at war with Iran in the next few years for absolutely no good reason, just like Iraq!~ So I guess I just don’t get your point.

  10. Andrew L Sullivan (author) says:

    Mike Weaver, while you have taken the conversation way off topic, I still feel a need to address your concerns. If General Motors could not get parts or make cars abroad because tariffs were, it would end up making inferior cars in the USA at higher costs resulting in fewer people willing and able to buy such cars. This has been proven before.
    As for Iraq, look up the Iraq Liberation Act of 1998. The removal of Saddam was the right thing to do, but the messaging over the whole affair was a disaster. I am considering writing further on such matters in the future.

  11. Mike Weaver is being silly. Protectionist tariffs only raise prices for products here at home. And most often, the benefit to the industry being “protected” is far outweighed by the collective burden to consumers.

    All government intervention and interference results in less economic efficiency.

    On the other hand, there are trillions of dollars held by U S corporations in overseas accounts that will remain outside our economy, simply because the U S will tax any repatriation of that money at a high rate. Already taxed overseas, the Feds want to tax it again. Now that is real greed.

    Government cannot manage the economy, it only makes things worse.

  12. Mike Weaver says:

    I really don’t think I am being silly at all! I believe in the Constitution to the fullest! I believe it and the Bible had the same Author! I may not have a degree in Economics, but I can say what I have observed in my lifetime. I have seen a steady decrease in AMERICAN manufacturing and a steady rise in AMERICAN jobs being sent across the border and over seas! It seems to me that we need to do SOMETHING to make it harder for big Business to exploit our resources and bring those jobs back where they belong! The old fear tactic that ” If we put too much pressure on big Bizz they will go away” is NONSENSE! They will take less profit over no profit any day of the week! I was against the bailout of the Banks and the Auto industry, I say let them go under and allow a good AMERICAN businessman to take over! It isn’t our fault they became too greedy and bankrupt their respective Companies! I can honestly say as a lifelong Republican, that BOTH Parties have sold us down the river to big Business! If ANY free thinking Republican was for the bailouts, they cannot be for the free trade and/or free Market society!! If I were to go under, the Gov would NOT bail me out, but instead Someone who was a better Business man would take over my line and Customer’s and make a success out of it. AGAIN I realize that I do not have a degree in Economics, but SOMETHING needs to be done! It doesn’t take a rocket Scientist to figure out that the old ways both Republican and Democrat aren’t working!! I have lived through both, and they never change! Maybe with the new LIBERTY movement we can FORCE change! Yes Jerry Anderson ( I wish you had the courage to post under your real name) I am a ” PAULBOT”. I think any free thinking AMERICAN Conservitive was a ” PAULBOT before Ron Paul started running, think about it, he is only preaching from the Constitution!

  13. Matthew says:

    Mike,

    Maybe you should take an economics class. If we have high protectionist tariffs on product coming in from other countries what do you think those countries will do? they will charge us a higher tariff on products we ship to them. All that higher tariffs do is drive up the domestic costs of the product and decrease markets for America to export our stuff. Its simple economics and doesn’t take an advanced degree to figure out. It is a worldwide economy and many of these “American” businesses get over 50% of their profits from overseas markets.

  14. Mike, you are getting a bit emotional.

    Consider this: manufacturing employment in this country peaked in 1945.

    Manufacturing output, on the other hand, has continued to grow. It is down from 2007, with the bad current economy, but the long term trend has been upward all along.

    Nothing of which you speak is new. We have been turning into a service industry economy for the lifetimes of everyone who is currently working. As it should be.

    We no longer manufacture textiles, since nobody wants to work for those low wages. But, people in Indonesia will, so all that is “outsourced”.

    Now, the question is, how do we increase employment at home? Clearly, moving shoe and shirt manufacturing back the U S is not a solution, so what to do?

    Whatever businesses wan to do, is the answer. Stop intervening and trying to determine their fates, and trying to manage the economy at the firm level. Let capital seek return and get government hell out of the way.

    The solution to insufficient market freedom is not less freedom. It is more freedom. Stop taxing overseas profits if you want that money to flow back into America. Stop punishing investors for seeking greater returns. Stop subsidizing failing industries (think “green”) just because your political allies feel good about something. Or bad about something, such as “big oil”.

    Consider, we have more energy resources under our ground than all of Saudi Arabia. That industry alone could break the back of any recession we might experience. But, the government won’t let that happen. They know better.

    You want to force change, Mike? Then stop government. That will bring about more prosperity and positive change than any rule or regulation you might imagine.

  15. Mike Weaver says:

    With all due respect Roger, I think your last post was condescending and as silly as anything you accuse me of posting! True, we do not manufacture textiles any longer for the reasons you mentioned. BUT we no longer manufacture CARD in this country either, before you say GM, FORD, Toyota, Honda ETC. Look and see where the vast majority of those vehicles are produced, The Japanese cars are assembled her while every part is manufactured over seas. You and everyone here knows that I am not asking to bring back the manufacturing of shirts and shoes, Please give me some credit for an IQ! The Auto Industry used to be a great source of income for Employee’s as well as CEO’S, BUT since the tariff’s were basically removed the greedy CEO’S moved those jobs overseas to further line their pockets on the backs of third world countries who don’t benefit from those slave wages any more than AMERICAN’S who lost those jobs. I should mention that the Ford F-150 is the ONLY truly AMERICAN made vehicle we have, which is why I chose to drive one! I have to disagree with your statement that manufacturing peaked in 1945, it was a great time for AMERICAN manufacturing because then it wa cheaper and easir for the big Businesses to build them here rather than outsource them. I guess we will have to agree to dis agree on this, I am not changing your view ,and you are not changing mine. I do however appreciate the dialogue!

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