We have all heard this if we listen to any of the Republicans running for office – the bottom 50% pay nothing into the treasury in income taxes and are essentially moochers, while the richest 1% pay somewhere in the range of 37% to 40% of all income taxes in this country .
I get so tired of hearing Sean Hannity ask how much is enough to take from rich people.
Limbaugh, Hannity, Beck, Grover Norquist, and every republican who either thinks like Michele Bachmann or is afraid that someone who does think like her will challenge them in a primary if they do not toe the line drawn by Roger Ailes (the president of Fox News), say it is not right to tax the rich more until everyone pays something, that this country was not set up for half of the citizenry to be moochers and cannot continue unless this is changed.
As someone said – Twain, Disraeli, Carlyle or someone, anyone else -“There are three kinds of lies: lies, damned lies and statistics.”
And trying to dig out the truth or falsity of this assertion will make your head hurt. It did mine, and I am used to working with numbers. I will try to demonstrate the fallacy of the Fox/Republican assertion without causing too much ear-bleeding.
Fox is factual, but not fair
The first lie, upon which this assertion is based, is not a lie of commission, but one of omission, of the thing magicians do when they want you not to see what it is they are doing. It is called misdirection.
A couple of facts:
- The top 1%, with incomes in excess of about $340,000, have about 30% of all income and pay about 37% of all income taxes.
- The bottom 50%, with income under about $26,000, have about 13% of all income and pay almost nothing – 2% in 2009.
So, Fox is right. On this narrow issue, which they trick many of us into believing is the whole fair and balanced truth, they are factual.
Ears bleeding yet? Just wait.
Now for the rest of the story (as Paul Harvey would say)
Contrary to what Al Gore said, there is no ‘Lockbox” or “Trust Fund.” Social Security is a part of the total federal budget income and outlays. Total revenues are about $2.3 trillion dollars, of which only about $1.1 trillion is from personal income taxes (sheesh – using the word “only” to describe trillions of dollars, but so it is). About $800 Billion is from social security taxes. Together, they make up more than 83% of total federal income – the balance being corporate income taxes (about 8%), with excise and other taxes making up the difference.
The Social Security tax is paid on only (there’s that word again in an odd place) the first $106,000 of income – after that, none is paid, so, not only do the 1% have a lot more income, they get a tax break once their annual incomes exceed $106.000 – over three times the 50% line.
The Social Security tax is comprised of the FICA tax and Medicare tax, half of which is deducted from the employee’s paycheck and the other half is paid by the employer. The FICA parts are 4.2% from the employee (with the reduction put in place last year) and 6.2% from the employer, for a total of 10.4%. The Medicare is 1.45% from each, for a total of 2.9%. All in, this is 13.3% of wages.
I consider the employer’s portion to be a cost of employing people and as such, a part that employee’s total cost of employment and credit the whole 13.3% to the employee, because without the employee, no tax would be due and in theory, if it were to go away, all employers would immediately raise the salary of every employee for their share of the payroll tax. Yeah, and – well, fill in your own metaphor. . .
When all the number crunching is done, the top 1% on average pay about one percent of their total income in Social Security taxes. For Medicare, there is no limit on the tax for earned income, but a lot of income of the 1% is so-called unearned income – interest, dividends, and capital gains.
It is the earned income in excess of $106,000 and the unearned income which caused Warren Buffet to write his op-ed piece in which he said Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
This goes back to St. Reagan, who supported higher taxes on corporations. Defending his tax reform proposal in 1985, Reagan said:
We’re going to close the unproductive tax loopholes that have allowed some of the truly wealthy to avoid paying their fair share. In theory, some of those loopholes were understandable, but in practice they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying 10 percent of his salary, and that’s crazy. It’s time we stopped it….
What we’re trying to move against is institutionalized unfairness. We want to see that everyone pays their fair share, and no one gets a free ride. Our reasons? It’s good for society when we all know that no one is manipulating the system to their advantage because they’re rich and powerful. But it’s also good for society when everyone pays something, that everyone makes a contribution.
The real story
When all the numbers are crunched and social security receipts are figured in, the top 1%, with 30% of total income pay about 22.8% of the total federal taxes collected while the bottom 50%, with about 13% of total income pay, are you ready for this?, about 13% of total federal taxes. Essentially their fair share.
This is, as they say, inconvenient for Fox and their Republican friends and is too mind-numbing to be talked about by any of the Democrats, so, unless we can and are willing to do the math, what we hear is the factual lie about this from the right wing and believe that fairness requires raising taxes on the bottom 50%.
Makes sense, I guess.