The rich are richer than you think

Posted on April 9, 2014

The right wing has done a lot of whining about the over-taxed rich and the under-taxed middle class. Mitt Romney famously complained that “47 percent of Americans pay no income tax.” But that meme conveniently forgets the fact that nearly everyone except the elderly on Social Security pays payroll taxes.

Speaker John Boehner moaned that “The top one percent pay 38 percent of the income taxes in America. You know, how much more do you want them to pay?” But Boehner, like Romney, is only talking about one particular type of tax—the federal personal income tax.

Focusing on that one tax—and ignoring all the rest—is a well-planned right wing tactic. Not only do working families pay taxes for Social Security and Medicare, we pay sales taxes, property taxes, gas taxes, phone and cable taxes, sin taxes (if we indulge), highway tolls, license fees, and much more. When all the federal, state and local taxes and fees are added together, almost everybody pays about 20 to 30 percent of their income. So our overall tax system is something close to a “flat tax” on income. Taxes are hardly progressive at all.

And why are we talking about income at all? The costs of running our governments have nothing to do with income. Some of government is supposed to serve and protect every individual equally (in reality, it doesn’t). But if we step back and look at the total costs of government, everything that’s really expensive is designed, overwhelmingly, to serve wealth not people.

The U.S. military is deployed in a way to defend our nation’s economic interests—they protect ships, oil fields and other assets that are owned by and operated for the rich. Our police forces and courts mostly do the same. America’s transportation and energy transmission infrastructure is far more valuable to the wealthy than to the rest of us. Government-owned lands create profits for drilling and mining companies. Government-funded research and development projects create profits for technology and drug companies. And when the government bails out Wall Street banks after they crash the world economy, it’s the rich who get the money while the rest of us get to watch.

The point is, a fair tax system would be based far more on everyone’s share of assets rather than on income or retail purchases.

The richest one percent of people own over one-third (35.4 percent) of all the combined wealth in America—stocks, bonds, businesses, real estate, cars, jewelry. The richest five percent own nearly two-thirds (63.1 percent) of all the wealth. Just the Forbes 400 wealthiest Americans alone are worth more than all 41 million African Americans in the U.S combined.

So, no, they do not pay anywhere near their fair share in taxes. Wouldn’t it be fairer if the top one percent paid something like 35.4 percent of all the federal, state and local taxes in America and the top five percent paid something like 63.1 percent? That would mean about a 50 percent tax increase in taxes on the rich. Perhaps we should start by restoring the estate tax.