It has been said that “taxation is the art of plucking the goose without making it squeal.” To pay for massive new government spending, politicians are devising new ways to get more golden eggs from the goose. That is why President Biden is lobbying for tax increases, so everyone pays their “fair share.”
Rarely do politicians explain what the phrase “fair share” means, but you can be sure they mean that the tax rate needs to go up. As I have discussed in previous commentaries, it isn’t necessarily true that tax revenues increase when tax rates increase.
But let’s do a thought experiment. How would you define fair share? What percentage of the entire country’s income taxes do you think the top one percent of earners should pay? When I do ask people, they will suggest that the top one percent should pay 20 percent or 30 percent. Rarely do they guess an accurate percentage.
The latest report from the Internal Revenue Service shows that that the top one percent paid 42.3 percent of the country’s income taxes in 2020. And that is a two-decade high in the share of taxes paid by those top earners. Also, the top 5 percent of earners paid 62.7 percent of all income taxes.
The editors of the Wall Street Journal lament that President Biden “likes to cherry pick the example of the odd billionaire who might pay a small amount of tax in a given year.” But most of the taxes are already paid by the top earners. The bottom 50 percent of earners only paid 2.3 percent of all income taxes.
Remember these percentages the next time you hear politicians calling for the wealthy to “pay their fair share.”