Wednesday, April 10, 2002 By Radley Balko
A curious thing happened when I filed my
income taxes this year. I discovered that I'm filthy rich.
How do I know? Because the deduction Im
supposed to get for the interest I pay on my student loans
phases out for "top earners." This year, under former
President Clintons tax code, that deduction began phasing out
for me. This means Im rich.
I'm rich! My first inclination was to call
up every ex-girlfriend I've ever had and let her know she
missed her chance. After all, Ill be dating supermodels soon.
I broke out the Cockburn's 20-year Tawny Port, poured it
carelessly (I can afford to spill now!), and split a snifter
with my driver. I told my chef to fire up some filets and
invite his family over for dinner on me. I lit a fresh
Macanudo with a rolled up, flaming $20 bill. I can do these
things now. Because I'm rich.
I'm kidding, of course. In reality, I just
came out of forbearance on one of my student loans. I still
rent my house. When I do have a driver, it's only for ten or
fifteen minutes, and my limo is usually yellow, with a lamp on
top. My chef is always asking me if I want to make that a
value meal. Still, according to the tax code, I'm "rich."
A new study by the Tax Foundation casts some
light on the absurdities of the concept of "wealthy." During
the fight over President Bush's tax plan last year, Democrats,
you may remember, harangued the president as a man too
sympathetic to the wealthy. As it turns out, wealthy is a
fairly relative term, and the reason why the wealthy get the
brunt of most Republican-sponsored tax breaks is because get
ready for this the wealthy pay the brunt of the taxes.
In 1999, the richest 1 percent of Americans
took in 19.5 percent of the income. But they paid 36.2 percent
of the taxes. The figures are similar for the top 5 percent,
who made 34 percent of the money but paid 55 percent of the
taxes. So much for rich people escaping taxes with sneaky
loopholes, sleazy accountants and offshore shelters.
Want to bust more stereotypes? The income
cutoff for the richest 5 percent is just over $120,000. In a
good-sized city, a college graduate in his late twenties could
probably expect to make about $60,000 per year. If two people
making this much money get married, they'd find themselves in
the top 5 percent of income earners the filthy rich. These
aren't trust fund babies. Theyre Gen-Xers from the suburbs
with a bachelor's degree.
The top 25 percent of income earners (and
this would include those same two Gen-Xers if they didn't get
married) pay a whopping 83.5 percent of U.S. taxes. In
contrast, the bottom half of income earners that's 50
percent of all taxpayers bear just 4 percent of the tax
burden, while earning 13 percent of the income.
Anyway you slice it, rich Americans are
paying far more than their share.
So when Democrats say that the latest
Republican tax cut "only benefits the wealthy," we need to do
two things. First, we need to remember just who the wealthy
really are. Wealthy no longer necessarily means the
aristocratic Louis Winthorpe III, Dan Akroyds riches-to-rags
blueblood in Trading Places. Today, wealthy, as defined
by the IRS, probably means the 28-year-old public relations
account executive sitting next to you on the subway.
Second, we need to employ a little logic.
If the richest Americans are bearing a huge chunk of the tax
burden, then any sizable tax cut will, necessarily,
disproportionately benefit the richest Americans.
Opponents of tax cuts also usually include
the poorest Americans in their figures, who pay no income
taxes at all. A tax break for someone who pays no taxes is in
some places called free money.
Another nasty figure from Tax Foundation
study shows that the tax gap is growing. The richest 1 percent
paid just 19 percent of the total tax burden in 1980. As noted
above, they now pay 36 percent.
This is cause for concern. When 50 percent
of Americans pay just 4 percent of the taxes, what sort of tax
policies do you think theyre going to endorse on Election
Day? Egged on by Democrat demagoguery, the tax burden will
likely continue to shift to the upper brackets, which will
create even bigger gaps. Its possible that, in the words of
Sen. Barbara Milkulski, well keep "going and getting it from
those whove got it" until we drive our economy straight into
the ground.
This is the sort of majority tyranny
factionalism our more thoughtful founding fathers feared. In
summarizing the argument of those concerned with factions,
James Madison wrote in Federalist No. 10, "... measures are
too often decided, not according to the rules of justice and
the fights of the minor party, but by the superior force of an
interested and overbearing majority."
For now, the majoritys interest is
partially offset by the fact that wealthier people are more
likely to vote. But as both parties fight for the loyalty of
the middle class with tax credits, the tax burden will
continue to climb the income ladder.
At the same time, politicians are wooing
other loyalties with promises of more government services.
Someone has to pay for all this. Increasingly, those people
are our societys most wealthy. And every dollar they pay in
taxes is a dollar less they invest in job and wealth creation.
It hurts them now. Itll hurt all of us later.
Radley Balko is a writer living in
Arlington, Va., and publisher of The
Agitator.com.
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