It’s tax time, which means it’s time for conservatives to roll out their perennial complaint that the well-to-do are being asked to pay too much. They’re dead wrong, as every reasonable citizen will conclude in a moment, but first let’s hear them out.
"You’re getting to the point where there are more people on this side of the see-saw not paying any income taxes," says Bruce Josten, the top lobbyist at the U.S. Chamber of Commerce, "and the burden is simultaneously increasing on the smaller and smaller portion of the population."
John Cogan, an economist at the Hoover Institution who helped write President Bush’s original economic plan and who now advises California Gov. Arnold Schwarzenegger, put it to me this way:
"If you ask most Americans, ‘Do you think it’s proper that the bottom half of the population from $50,000 and below should be receiving grants from the government and the top half should be paying for those,’ they’d say no."
If what Cogan and Josten laid out were the full picture, it would indeed be cause for alarm – how can we have so few Americans pulling the cart and so many riding in it?
But the instinctive way conservatives have come to reason and argue about the federal tax burden is misleading and incomplete – as a look at the big picture on federal taxes shows (this will take a few numbers, but they’re guaranteed to change your worldview, so sit tight).
Conservatives love to cite facts like these: The top 5 percent of taxpayers pay over half of federal income taxes; the top 1 percent pay more than a third all by themselves; and the bottom 80 percent of earners together pay less than 20 percent.
If these facts are all you carry in your head (and all that the people you spend time with all day carry in their heads), then it’s obvious that Ayn Rand was right: We’re a nation of freeloaders who enjoy the blessings of liberty thanks to a handful of generous giants.
But this is not the full picture. Any fairminded person should want to know two other things: What percent of total income do these different slices of earners actually earn, and what share of total federal taxes, not just income taxes, do they pay?
The conservative worldview inexplicably ignores the payroll tax (as well as excise taxes on things like liquor) that take their biggest bite, proportionally, from lower-income Americans.
These regressive taxes have quietly (and shockingly) reached near-parity with the income tax as a source of federal revenue. This year the income tax will account for 42 percent of federal revenue; the payroll tax will come to 41 percent (up from 16 percent in 1960).
If you count the portion of the payroll tax paid by employers (which economists agree effectively comes out of workers’ wages), four in five workers pay more in payroll taxes than in income taxes.
When you add these necessary facts to the incomplete conservative analysis, America doesn’t look like an Ayn Rand novel after all.
Consider: The top 1 percent of America’s taxpayers earn 17 percent of the income and pay 23 percent of federal taxes; the top 5 percent earn 31 percent of the income and pay 40 percent of the taxes; the bottom 80 percent of the earners make 41 percent of the income and pay 31 percent of the taxes (and those numbers are from 2001, the most recent such data available; President Bush’s tax cuts have since made the burden on top earners lower). In other words, in aggregate, we have a modestly progressive federal tax system.
Which brings us to the obvious question: Why do leading conservatives stress only part of the picture? There seem to be only two options: Either they’re not that smart, or they think the rest of us (especially in the press) aren’t that smart.
I’ll let you make the call. But the conservative advocates I know tend to be very smart people.
Matthew Miller is a senior fellow at the Center for American Progress.