IRS data show that in 2009 none of the 400 richest US taxpayers, measured by adjusted gross income, paid more than 35 percent in average taxes. Forty percent paid between 25 and 35 percent, and half paid less than 20 percent. Famously, Warren Buffett disclosed that his percentage of tax paid was less than that of his secretary. Not all rich people are heartless monsters; they understand the dangers and unfairness in the system. The Warren Buffett rule, now being promoted by the White House, is that no household making an annual income of $1m or more should pay a smaller proportion of its income in tax than a significant proportion of middle class families.
The wealthiest households are paying tax at the lowest rate in 50 years. The marginal tax rate, which was 90 percent in 1960 (clearly too high!) is now only 35 percent. But the real scandal is in the tax loopholes. Capital gains and some dividends are taxed at a low rate, benefiting mainly high income recipients. Lobbyists have had exceptions for the wealthy inserted into Congressional budgets, allowing them to use offshore tax havens and other scams dreamed up by the big accountancy firms. And it is not only the super rich who get out of paying taxes. In 2010, only 49% of taxpayers with adjusted gross income of at least $200,000 (constant 1976 dollars) paid any tax at all. (Tax Policy Center)
On the other end of the scale, there is little wiggle room. We were approached for advice some years ago by an immigrant lady (with a daughter) whose income was $18,000 p.a and who had had a tax demand of $6000. I am not suggesting that this is typical – I don’t know. But it helps to show how chaotic and unfair the US tax system is.
Why should this concern Epicureans? Because if you care about your fellow human beings, situations like this are bad for the peace of mind of everyone (except the greediest). They are also bad for the economy (inadequate aggregate demand) and for national morale and long-term political stability. Of course you may say that we should increase the efficiency of expenditures and I agree. But this is a different subject and not easily addressed. In the meantime, taxes are needed to do the government’s work.
Sensible people believe in paying tax. If there are no taxes, we have no roads , no schools, no police, no law courts, no food and drugs testing, no defense….I won’t go on. The anti-tax people are short-sighted, selfish freeloaders and their self-centered beliefs have nothing in common with Epicureanism.
“Taxes are the price we pay to have a civilized society”. (Oliver Wendell Holmes, Jr.)
I agree with you when you say that rich people ought to pay more in tax. However, I think there is a difference between being anti-tax and being anti high-tax. If you ask the average American whether they want higher taxes and more services, or less taxes and fewer services, a significant proportion will choose the latter. It is up to Epicureans to convince their fellow countrymen that the former is in their best interests.
There is also the argument that by raising taxes, you will be discouraging people to become rich, by reducing the incentive. I’m not sure how far this argument can be taken, but even I will admit that on the whole, less taxes means more private-sector jobs.
You may be right, Owen, that higher tax means more private-sector jobs. During the huge slide in tax rates from about 90% down to 35% there was definitely evidence of an effect on jobs. Surprising if there wasn’t! And there have been studies that show an effect on jobs, although it isn’t huge. But I ran an business for years, paid the tax and didn’t bother about trying to avoid it. I concentrated on getting more customers, better products and better service. Tax was a given and something you had to deal with, like sick pay and holidays – in a positive frame of mind. So I always get impatient with businessmen who talk all the time about tax. Get out there and develop the market, for heavens sakes!