The Left - Wrong On Taxes Again

Liberal high tax advocate Mathew Miller trys to paint tax opponents as liars and misrepresenters in his not very witty L.A. Times Op-Ed today

Conservatives love to cite facts like these: The top 5% of taxpayers pay more than half of federal income taxes; the top 1% pay more than a third all by themselves; and the bottom 80% of earners pay less than 20%.

. . . . .

But this is not the full picture. Any fair-minded person should want to know two other things: What percent of total income do these different slices of earners actually earn; and what share of total federal taxes, not just income taxes, do they pay?

. . . . .

The conservative worldview inexplicably ignores the payroll tax — predominantly the FICA deductions for Social Security and Medicare — as well as excise taxes on things like liquor, gasoline and tobacco. Those taxes take their biggest bite, proportionally, from lower-income Americans.

. . . . . .

The top 1% of American taxpayers earn 17% of the income and pay 23% of total federal taxes; the top 5% earn 31% of the income and pay 40% of the taxes; the bottom 80% of the earners make 41% of the income and pay 31% of the taxes. These numbers are from 2001, the most recent available data; Bush's tax cuts have since made the burden on top earners lower. In other words, for all the conservative whining, we have a modestly progressive federal tax system.

Uh, except that he completely forgets a couple of important points.

First, he ignores the double taxation on corporate profits. Rich Americans, who's wealth is usually tied up in stocks or other investment holdings, are invariably taxed at a higher corporate level as well as a personal level when they liquefy those investments.

Second, Payroll taxes are higher on those who earn more. For some reason, Mr. Miller thinks that most wealthy Americans just found their wealth growing on trees. Sorry, but that doesn't happen. These Americans earned a substantially higher salary than those in lower tax brackets and therefore contribute a substantially higher share of the payroll taxes as well.

Finally, I would imagine that the wealthy also pay a disproportionate share of sales and excise taxes as well. They like to drive $100k Mercedes and $65k Hummers. Don't you think the sales tax on those is just a wee bit higher than on a $5k used 10 year old Honda? Plus, those bigger cars invariably consume far more fuel ... hence the wealthy pay more in fuel taxes.

How about other consumer goods? Hmm, $5,000 plasma TV or $250 20" Sony. Want to take a guess which costs significantly more in taxes. The rich drink more expensive booze and hence pay more in taxes. $75 bottles of Johnnie Walker Black vs. $2.50 bottles of Mad Dog 20/20. Guess which includes more taxes. $20 Montecristo Cigars vs. $2.50 packs of generic cigarettes. Guess who pays more in taxes. The rich also eat more expensive food ... and pay more in taxes.

Of course the same holds true across the board. In any category imaginable, the rich will pay more in taxes because they choose to purchase items that cost disproportionately more. Heck, the Sharper Image Store is really nothing but a devious plot to pry more money out of rich peoples hands. There is nothing the store sells that anyone REALLY needs. But the rich spend a fortune there, and their state budgets are all the better for it.

Sorry, the tired old liberal "tax the rich" argument still doesn't hold water.

Which brings us to the obvious question, one that could be posed to the president at his press conference tonight: Why do leading conservatives stress only part of the picture? Either they're not that smart, or they think the rest of us — especially in the media — aren't that smart.

I'll let you make the call. But the conservatives I know tend to be very smart people.

Well, most conservatives I know are pretty smart too. But almost everyone I know thinks the media is filled with a bunch of ignorant fools and based upon Mr. Miller's reasoning, they are well justified to do so. Either that, or Miller was deliberately misleading the L.A. Times readers.

UPDATE - John from The Crease (who's an accountant, btw) emails in with some excellent points. Wish I had thought of them

First, there's his paragraph:
 
"The top 1% of American taxpayers earn 17% of the income and pay 23% of total federal taxes; the top 5% earn 31% of the income and pay 40% of the taxes; the bottom 80% of the earners make 41% of the income and pay 31% of the taxes. These numbers are from 2001, the most recent available data; Bush's tax cuts have since made the burden on top earners lower. In other words, for all the conservative whining, we have a modestly progressive federal tax system. "
 
OK, so let's look at what he's really saying.  He's saying basically that taxes, to be "fair," should be a function of the income slice that group earns.  OK, by his own numbers then the top 5% of wage earners, who earn 31% of all income in the US, are overtaxed as they pay 40% of all taxes.  Likewise, the bottom 80% (He's conveniently missing 15% of wage earners in his "analysis," by the way) earn 41% of all income and pay 31% of all taxes.
 
OK, so to be "fair," is Mr. Miller saying that taxes should be lowered by 9% for the top 5% of wage earners, and increased by 10% for the lower 80%?  BY HIS OWN ANALYSIS the "rich" are overtaxed.
 
Second, income tax is the debate here.  Payroll taxes like FICA and Medicare are distractions at best, mainly because of two very good reasons:
 
1)  Theoretically, at least, money paid into FICA is paid back at a later date.  Therefore, it's fraudulent to include that in this study.
 
2)  The rich make little or no use of Medicare.  They don't have to.  Therefore, the poor are getting a disproportionate benefit from Medicare when compared to what they're paying in, because the rich are footing the bill.  So properly, the added benefit should either be factored in as income, or more honestly, the Medicare tax (as all payroll taxes) should be ignored as irrelevant.

He also reminded me that the rich are hit with two additional taxes that the poor have no experience with, the Luxury tax on things simply because they are expensive and the death tax.