It’s a Lie! – The Rich Don’t Pay the Same Taxes as the Poor

It’s a Lie! – The Rich Don’t Pay the Same Taxes as the Poor

© David Burton 2012

tax The Rich

     “President Obama Friday {November 9, 2012} claimed an election mandate to raise the richest Americans’ taxes before across-the-board hikes push the country back into recession next year.
     “’I'm not wedded to every detail of my plan. I'm open to compromise,’ Obama said in the East Room of the White House.
     “’But I refuse to accept any approach that isn't balanced. I am not going to ask students and seniors and middle-class families to pay down the entire deficit while people like me making over $250,000 aren't asked to pay a dime more in taxes,’ he said.”
(Ref. 1)

     The President once again repeated the myth that “The Rich” pay the same amount of taxes as the rest of us and that the rich aren’t paying their “Fair Share”. These claims are in response to the fears of the implementation of sequestration, scheduled to go into effect by the end of the year if the President and Congress do not take action. “A Thursday report by the Congressional Budget office affirmed fears about the cost of inaction: a return to recession and an increase in unemployment from 7.9 percent to 9.1 percent next year, with the typical household paying an additional $3,500 in taxes.” (Ref. 1)

     What the President was saying and implying is simply not true! The people who aren’t paying their fair share are the nearly 50% of Americans who pay no taxes at all! “We are already to the point where there are more people in the wagon than those pulling it. Every day we are getting closer to the point where over half of the people depend on some sort of government check, yet 50% of us have no skin in the game and pay no federal taxes.” (Ref. 2)

     What the President was railing against is the fact that some of the rich may pay at the same income tax rates as everyone else. BUT what he isn’t telling the American people is that income tax rates are irrelevant. It’s the amount of taxes paid that is important. If you or I earn $50,000 and pay 20% in taxes, that amounts to $10,000 in taxes. If a rich person earns $1 million and is taxed at the same 20% rate, he pays $200,000 in taxes. The fact is – The rich pay much more in taxes than the rest of us!

     “‘Tax breaks for the rich’ is the big lie come alive. Under the Bush tax cuts, 25 million Americans at the bottom half of the income scale have been wiped off the federal income tax rolls. And the rich? The federal tax burden of the top 1% of earners has gone from 19% under Jimmy Carter (in 1980) to 39.4%. Meanwhile, the bottom 50% paid 3.1% of taxes in 2005. In 1995, they paid 4.6%.” (Ref. 3)

     So the President says the rich don’t pay their fair share? It seems that that the top 1% of earners, or the so-called “Rich”, are paying nearly 40% of all the taxes while the bottom 50% are paying about 3%. You tell me – who isn’t paying their fair share?

     The president needs to stop misleading the American people. It’s not the tax rates that are the issue. The real issues are how much total revenue there is and how much total spending there is. And, historically, the lower the tax rates the higher the tax revenues! Why? Because lower tax rates stimulate the economy. From a government revenue perspective, if a 20% tax rate creates a $2 trillion economy while a 30% tax rate results in only a $1 trillion economy, then it’s better to have revenue of 20% of the $2 trillion ($400 billion) instead of the 30% of $1trillion ($300 billion).

     “History shows that tax hikes bring in far less revenue than expected. It’s easy to see why: Raising taxes on those with lots of wealth shrinks the amount of capital available for investment, which means fewer new jobs, slower growth in incomes and lower overall productivity. Hardly a policy for prosperity. This is envy, pure and simple, and a tax policy based on envy is the worst kind. It sets neighbor against neighbor and downplays the contributions of skills and entrepreneurial gusto that those we derisively call the rich bring to our economy. In economics, as in most religions, envy is among the deadliest of sins.” (Ref. 4)

     One example of the effects of a tax rate reduction occurred in 2003-2004. “After the 2003 tax rate reductions {the so-called Bush tax cuts}, business investment surged, the stock market leaped 32%, and the economy created 5.3 million new jobs. Overall economic growth doubled.” (Ref. 5) An example of the opposite effects of a tax rate increase occurred just after 1990. “In 1990, the first President Bush . . . raised the federal gasoline tax and federal excise tax, and imposed a 10-percent surtax on the "top" income bracket, raising its taxes to 31 percent.” (Ref. 6) The recession of 1991-1992 resulted.

     Reducing tax rates increases government revenues, stimulates the economy, and eases the economic burdens on taxpayers. Consider the following quotes by President John F. Kennedy:

"It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
     – John F. Kennedy, Nov. 20, 1962, president's news conference (Ref. 7)

"Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government."
     – John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964 (Ref. 7)

"It is no contradiction – the most important single thing we can do to stimulate investment in today's economy is to raise consumption by major reduction of individual income tax rates."
     – John F. Kennedy, Jan. 21, 1963, annual message to the Congress: "The Economic Report Of The President" (Ref. 7)

"A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues."
     – John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill (Ref. 7)

"In short, it is a paradoxical truth that ... the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
     – John F. Kennedy, Nov. 20, 1962, news conference (Ref. 7)

"A bill will be presented to the Congress for action next year. It will include an across-the-board, top-to-bottom cut in both corporate and personal income taxes. It will include long-needed tax reform that logic and equity demand ... The billions of dollars this bill will place in the hands of the consumer and our businessmen will have both immediate and permanent benefits to our economy. Every dollar released from taxation that is spent or invested will help create a new job and a new salary. And these new jobs and new salaries can create other jobs and other salaries and more customers and more growth for an expanding American economy."
     – John F. Kennedy, Aug. 13, 1962, radio and television report on the state of the national economy (Ref. 7)

  1. President Obama claims election mandate to tax the rich to avoid 'fiscal cliff', Joseph Straw, New York Daily News, 9 November 2012.
  2. NoBama-Go Yankees, Robert O’Koniewski, Esq., The Valley Patriot, Page 5, May 2010.
  3. The Big Lie, Investor’s Business Daily, Forbes , Page 22, 19 May 2008.
  4. Schadenfreude, Investor’s Business Daily, Forbes, Page 24, 5 May 2008.
  5. Go for Growth, Brian M. Riedi, Forbes, Page 22, 11 February 2008.
  6. Obama may break bent economy, Dick Morris and Eileen McGann, Boston Herald, Page 23, 23 September 2008.
  7. The Interesting History of Income Tax, William J. Federer, Published by Amerisearch, Inc., P.O. Box 20163, St. Louis, MO 63123.


  13 November 2012 {Article 147; Politics_26}    
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