OPINION: The rich already pay more than their fair share of taxes
“It’s not what you don’t know that gets you into trouble. It’s what you know for sure that just isn’t so.” — Mark Twain
The rich don’t pay their fair share of taxes. This has been said or written by politicians from Joe Biden to Kamala Harris, Sen. Martin Heinrich, to Rep. Melanie Stansbury and many others. “Soak the rich” forms the basis of “progressive” economic thinking in the United States.
What constitutes “fair” in the world of taxation is an open question, but many of these politicians make the unfounded claim that the rich pay taxes at a lower rate than do low- and moderate-income taxpayers.
That is simply not the case. For starters, I’d encourage anyone who does believe the rich pay lower taxes than the poor to check out the latest “tax burden” distribution chart from the Joint Committee on Taxation.
The chart shows that at the federal level, combined employment income and excise taxes consume 2.2% of the earnings of those making $15,000 annually or less. Those earning between $80,000 and $100,000 pay 14.7%, while those earning more than $1 million pay an average tax rate of 30.4%. All income levels are included, but the trend is for those at higher incomes to pay a higher percentage of their incomes in the form of taxes.
That’s because the United States has a “progressive” tax code. This means that individuals who earn more pay higher tax rates, not just more overall taxes, than do those who make less. Sadly, the media rarely call politicians like President Biden out for their assertions that “a schoolteacher in West Virginia paid higher taxes than Elon Musk.”
To address the supposed issue of the wealthy paying inadequate taxes, Biden proposed — and Kamala Harris has endorsed — a plan to tax “unrealized” earnings. What is an “unrealized” earning you might ask? In the case of Elon Musk, it would be stock in Tesla, the company he began, which makes electric vehicles.
Those shares of stock rise and fall with every trade on the stock market, but until Musk sells those shares, he is not taxed on them.
Another case of interest to more Americans is that this scheme would allow the federal government to tax the increased value of your home. So, if your home went from $250,000 to $300,000 over the past few years, the federal government could tax that $50,000 “unrealized gain” without you selling your home.
Where would you come up with the money to pay those taxes, and keep your home? Why should you be taxed on “gains” that are largely the result of government-driven inflation in the first place? These are worthwhile questions, but ones that have seemingly never been asked of proponents of this plan.
There is no question that the nation’s fiscal imbalance is a dire problem. The federal debt is at $36 trillion and shows no signs of dropping anytime soon. But, it is federal spending, not inadequate taxes, that have caused the problem.
Even after adjusting for inflation, federal spending has risen from $4,333 per-person back in 1965 to $19,594 in 2022. This is a bipartisan problem, and both the recent Biden and Trump administrations, and Congresses, have been guilty of allowing the federal government to grow uncontrollably.
No matter who wins the presidency, fiscal restraint is a necessity. Imposing an unfair new tax on “unrealized” capital gains will both harm the U.S. economy and “solve” a problem that really isn’t one at all.
Paul Gessing is president of New Mexico’s Rio Grande Foundation.
