The Right State

Finally the writers at the New York Times learn math. For a while now the left leaning writers at the Grey Lady have been bemoaning the fact that when tax cuts are given out across the board, the rich receive the larger benefits. Now they finally have proof. Someone learned math and figured out that even if you tax the same amount across the board, more is taken from the rich which is not a problem. But then, when a tax break is given across the board, the rich are the biggest recipients of the money coming back.

Among taxpayers with incomes greater than $10 million, the amount by which their investment tax bill was reduced averaged about $500,000 in 2003, and total tax savings, which included the two Bush tax cuts on compensation, nearly doubled, to slightly more than $1 million.

These taxpayers, whose average income was $26 million, paid about the same share of their income in income taxes as those making $200,000 to $500,000 because of the lowered rates on investment income.

Americans with annual incomes of $1 million or more, about one-tenth of 1 percent all taxpayers, reaped 43 percent of all the savings on investment taxes in 2003. The savings for these taxpayers averaged about $41,400 each. By comparison, these same Americans received less than 10 percent of the savings from the other Bush tax cuts, which applied primarily to wages, though that share is expected to grow in coming years.

You can hear them now, “Evil rich people are not paying their fair share of the tax burden and so the middle class and the poor have to take up the slack.” What they don’t tell you is that the top 1% of the wage earners are paying a disproportionate amount of the tax burden. According to Bruce Bartlett of Townhall.com the IRS provides these figures.

Income Group —- Tax Share
Top 1 percent —- 33.7 percent
Top 5 percent —- 53.8 percent
Top 10 percent —- 65.7 percent
Top 25 percent —- 83.9 percent
Top 50 percent —- 96.5 percent

This is one of those “duh” moments. Since the top percentage of wage earners are paying the taxes, of course they are also going to be the largest recipients of the returns when taxes are lowered.

It reminds me of a story I heard once. I do not remember the source and I am not sure I have the numbers right, but the story goes like this. There were 10 men who would all eat lunch at the same restaurant at lunch every day. One of the men was super-rich, two were rich, three were middle class, and four were poor. Since they were going out to eat every day the men devised a scheme where they would break up the cost of the $100 meal according to how much the made. The breakdown follows:

Rich paid about $56

Next paid about $16

Next paid about$12

Next paid about $9

The next paid $5

The next paid $2

And the rest paid nothing.

The men were happy with this arrangement. Then the restaurant owner who liked the men’s business decided to give them a price break. Instead of charging them $100 for the meal, he charged them $80. The men were so used to paying the $100 that they did not know what to do. Finally they decided to again break the bill for the meal according to how much each made. The breakdown was as follows:

Rich paid about $46

Next paid about $13

Next paid about $10

Next paid about $7

The next paid $4

And all the rest paid nothing.

They were all happy until they left the restaurant when the second rich man told the rich man, “I only got $3 back while you got $18. That’s not fair. The poor men said, “Wait, we didn’t get anything back. You are discriminating against us just because we are poor.” So the men all got mad at each other and never went out for lunch again.

That’s the way it is on our taxes too. The rich pay the most and so they receive the most in return. But if we keep this up, penalizing the rich, none of us will be able to have lunch.

Maybe some day far off in the future, the New York Times will learn the kind of math the rest of us learned in school.

Tags: Culture //