A Few Thoughts On Tax Fairness

By Steve Barlotta, CPA

I know I’ve been hitting the topic of “tax fairness” pretty hard lately. And I realize you’ve probably heard this subject discussed ad nauseum throughout the presidential election. But, I wanted to share a few more pieces of information regarding this theme and then I’ll move on. In a new book Wall Street Journal contributor Stephen Moore presents some eye opening information regarding how much the top ten percent of income earners pay in federal income taxes in the U.S. compared to  other
industrialized nations in the world.

As the chart above outlines, the top ten percent of taxpayers in the United States pay 45 percent of the country’s total federal income taxes. Whereas, the average industrialized nations’ top ten percent of tax filers pays a considerably lower 32 percent of their countries’ total taxes. Included on the above list are countries like Sweden, France, and Italy whose economies are more far more socialized than the United States. In light of this data, I believe we need to rethink the presumption that the top earners in our country are not paying their “fair share”.

One more thought. What if we actually lowered tax rates on the top ten percenters? Well, history suggests that their share of the tax burden will actually increase. When the U.S. tax rate was lowered significantly in the 1920s, 1960s and 1980s, upper-income taxpayers saw their share of the federal tax burden increase. Case in point, in the 1980s, under President Reagan, the top rate fell from 70 percent in 1980 to 28 percent in 1988. In those years the top ten percent went from paying 48 percent of the tax burden in 1981 to over 57 percent in 1988. If the President is really serious about shifting the tax burden more on the wealthy, maybe he needs to reconsider his plan and decrease tax rates.

Source: Kerry Picket, The Washington Times, October 9, 2012