The poor aren’t paying their “fair share”. I bet you didn’t see that coming, huh? At the risk of angering the loyal readers of this fine blog, I wanted to write about the emerging political rhetoric that the rich aren’t paying their “fair share” in taxes. Please note that I am not rich by anyone’s definition of the word; however, I surely hope to be someday. If you join me in this crusade, you should be wary of any rhetoric that attempts to paint the current rich as the source of all of the country’s problems. As Americans, we should avoid the allure of “sticking it to the rich”, because any policy that takes from those who are currently wealthy will almost surely make it that much harder for people like you and me to realize our dream of becoming wealthy ourselves.
What Do You Mean the Poor Aren’t Paying Their “Fair Share”?
So, you may be asking yourself what kind of person would say that it’s not the rich who aren’t paying their “fair share”, but the poor. My answer would be a person who looks to the data.
As of 2008, which is the most recent data provided on the IRS’ website, IRS.gov, the top ten percent of all wage earners paid 70% of the taxes collected by the government in that year. That is up from 49.3% in 1980 and 65% in 2001.
At the same time, the bottom 50% of wage earners paid only 2.7% of the taxes collected by the government in 2008. That’s down from 7.1% in 1980 and 4.0% in 2001.
Welfare Spending Increasing
As the top 10% of wage earners bear an increasing burden, welfare spending as a percentage of total government spending has soared in recent years.
I point this out because which group do you think is more likely to partake of the welfare pot? Certainly not those making more than $330,000 per year (top 10%). I argue that it’s more likely that those in the bottom 50% are more likely to receive some sort of government aid. So, while that group is taking an increasing amount from the government’s coffers, it is putting in a smaller amount than ever before (2.7%). Is that group really paying its “fair share”?
Consider for a moment that you have two siblings. Each week the three of you do your assigned chores. Since you are older than your other siblings, you have a longer list of chores, but you also get a higher allowance. Your youngest sibling has the fewest chores to do and, therefore, receives a smaller allowance.
Now, assume that at the end of the week you and your siblings go to the candy store to buy some candy. You decide to purchase one large bag of candy with you paying a larger amount of the purchase price (you have more money) and your youngest sibling paying the least. Would you expect to get a larger portion of the candy? Yes, you paid a higher portion of the purchase price.
However, what if one of your parents saw that you had more candy than your other two siblings and made you give some of your candy to each of them so the split would be fair? Now, you’re all left with the same amount of candy, yet you paid more than either of them. Is that fair?
I certainly realize that income inequality in the U.S. is at all-time highs. The fundamental question is how do we close that wealth gap? Do we punish those who make more than $250,000/year (which isn’t much, by the way, for those living in cities such as New York), or do we make it easier for those in that bottom 50% to get to the top 10%?
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