A key component in the discussion on the distribution of wealth is the tax burden. Many "progressives" speak about the wealth not paying their fair share of taxes, especially after the Bush tax cuts. The numbers (see below) paint a very different picture. For various reasons, income distribution is skewed towards the wealthy, but the tax burden is even more skewed. For example, the top 10% may earn 35.75% of the national income, but they bear more than 59.67% of the tax burden. And as previously discussed 42% of the nation now pays no federal income taxes.
Even as the tax rate has fallen, for the wealthy, the ratio of taxes paid to income has risen for the top 5% and 10%. For example, in 1980, the top 10 percent earned 32 percent of the income and paid 44 percent of the taxes—a ratio of 1.4. In 2004, this group earned more of the income (44 percent) but paid a lot more of the taxes (68 percent)—a ratio of 1.6. In other words, progressivity—in terms of share of total taxes paid—has risen.
My concern is not for the "suffering of the rich," but for the economic effects of the growing and increasingly skewed tax burden that will only rise under Obama.
1. A very successful developer that I know stated "why should I bust my ass and take on risk if the government will seize my income..." In other words, the growing tax and regulatory burden that entrepreneurs face provides disincentives to invest in productive ventures, which means less jobs for the community and lower net tax revenue for the state...sorry progressives!
2. Individuals who do not undertake the efforts to improve themselves economically enjoy a zero tax burden, as well as a host of government subsidies for food, housing, medicine and education.
And Individuals who invest their time and energy to raise their income will face an increased tax burden, as well as a loss of government assistance. The end results is a more static and less economically mobile society, which I suspect will further aggravate the inequitable distribution of wealth.
Top 1% (above $364,657) earns 21.20% of national income and pays 39.38% of taxes.
Top 5% (above $145,283) earns 35.75% of national income and pays 59.67% of taxes.
Top 10% (above $103,912) earns 46.44% of national income and pays 70.30% of taxes.
Top 25% (above $62,068) earns 67.52% of national income and pays 85.99% of taxes.
Top 50% (above $30,881) earns 87.17% of national income and pays 96.93% of taxes.
Bottow 50% (below $30,881) earns 12.83% of national income and pays 3.07% of taxes.
http://www.taxfoundation.org/press/show/22652.html
http://www.american.com/archive/2007/november-december-magazine-contents/guess-who-really-pays-the-taxes
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