Do the Rich Pay Enough Taxes?

The Wall Street Journal online had, I thought, a good article on tax fairness today. I am posting the highlights below. The link for the story is here.

"Tax policy has two main goals: fairness and efficiency. Fairness encompasses philosophical values regarding how the tax burden should be distributed based upon the ability to pay. Efficiency incorporates economic consideration of how incentives built into the tax code affect individuals' willingness to work or save." [I've had a lot of "discussions" on Gather about what constitutes "fairness" when it comes to taxes. I have no doubt that will again be the case.]

"According to the Tax Policy Center...around 78% of the McCain tax cut would accrue to the top fifth of income earners, with almost 30% going to the highest 1%. This seems inequitable on its face...."

"But can we conclude that the rich would pay too little taxes under the McCain plan? Not really, because most media reports do not reveal the resulting share of the tax burden borne by the highest earners."

"...the top fifth of earners currently pay 67% of all federal taxes -- including not just income taxes, but payroll taxes, corporate taxes and death taxes. The top 1% of earners pay 26% of all federal taxes." [Yes, they are able to pay more, but how much more should they pay?]

"If the McCain proposal were passed, the top fifth would actually pay a greater share of total federal taxes and the top 1%'s share would decline by only 0.3%. In other words, high earners carry the vast majority of the federal tax burden and...would continue to do so under Mr. McCain's plan."

"A 2007 Gallup poll found that 66% of Americans believe upper-income people pay too little federal income taxes. Media reports play into these beliefs by focusing on how the candidates' plans would change the tax code, not on what the tax code would look like after those changes took place."

And what about efficiency?

"...the McCain proposal would maintain current income tax rates and lower corporate taxes to help American businesses...compete in a global economy. By contrast, the Obama plan would increase marginal income tax rates on high earners and raise taxes on capital gains and dividends, with the likely effect of contracting labor supply, reducing rewards for saving, and increasing incentives to avoid taxes. All but the very lowest income Americans would face higher marginal tax rates under the Obama plan than the McCain proposal." [I'm still waiting for an explanation about how 95% of Americans will get an income tax cut when only 60% of Americans pay income taxes.]

In closing, the article says, "We can argue whether the Obama plan is fairer or more economically efficient than the McCain plan, but only if we focus on the end product. How the presidential candidates' plans would change the tax code matters far less than where the tax code would stand when those changes are accomplished."