Gunpowder Chronicle posted on November 13, 2008 7:51 PM | Rating:
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When we can get beyond talking about very nebulous terms like "the rich" and the "middle class" and "the working poor", and we start looking at who actually pays for the United States of America, we start to see some really disturbing trends in tax policy. And those trends point toward significant political, economic, and social dysfunction that typically lead toward little things like coups and revolutions.
Consider this: according to The Tax Foundation, in 1985, just 16.5% of filers paid no income tax. That means that the burden of financing government services was shared by 83.5% of all citizens. Twenty years later, in 2006, that number had doubled. Nearly 33% of all filers (representing 96 million individuals, noting that filers includes married couples) paid no income tax. In 2009, under current tax law, that number will go up slightly to about 45%.
IRS Data shows that in 2006, 71% of all taxes were paid for by filers making over $109,000 per year. That represents the top 10% of all income tax filers. If you drop that income number to $65,000 or more per year, you find that this group -- 25% of all filers -- pay 86% of all taxes for the country.
This raises a number of important sociological questions. First, if paying tax is "patriotic" as Vice President Elect Biden likes to claim, are those of us in the top 25% bracket more patriotic than those who are not? Second, if taxes are our civic duty and responsibility, aren't a huge swath of us guilty of dereliction of duty? Third, is there anything affirming about nearly half of the nation getting something for nothing, one quarter getting more than they paid for, and the final quarter getting less?
Our incoming administration builds the argument for their approach to tax cuts around a questionable argument: that the Federal Government should offset the costs associated with state and local taxes by providing income tax rebates to people who never paid taxes. They also lump in Social Security and Medicare taxes. The problem there, of course, is that Social Security and Medicare taxes aren't technically taxes at all: they are premium payments.
The incoming administration, probably without realizing it, makes a conservative argument: state and local taxes are too high. If they weren't, there would be no need to offset them. THAT SHOULD BE A MAJOR PORTION OF ANY STATE GOP CANDIDATE'S PLATFORM IN 2010. Are you listening Jim Pelura? In making that argument, though, they provide a very unconstitutional response: using Federal tax code to essentially interfere in state and local tax policy. In other words, if the citizens of -- say, New York -- feel that their state taxes are too high, it is not the responsibility of a Federal Income Tax payor in Maryland (ie, ME) to offset that tax.
Ultimately, there will come a time when that top 25% of tax filers will decide that they are tired of carrying the other 75%. What will the politicians -- Republicans, Democrats, Socialists, and Independents -- do then? What will the politicians do when the marginal tax rate adjustments on the top end put a bigger squeeze on that 25%? When the marginal tax rates begin to disincentivize the most productive participants in the economy (that 25%) what will the politicians do? And what will the politicians do when as the migration from higher-tax states to lower-tax states accelerates, as that 25% begins to decide that the confiscatory policies of all levels of government just too much?
Someone better start thinking about these issues, because a stupid and silly tax code makes for very bad social dysfunction.