There has to be more fair wayPublished 9:25am Wednesday, October 12, 2011
More and more, cries are going up that all Americans should pay their fair share of the tax burden, and quite frankly I couldn’t agree more.
Yet the reality is that with respect to federal income taxes — the federal government’s largest source of revenue — most Americans don’t pay their fair share, either paying disproportionately more or less than other Americans.
In fact, according to the Internal Revenue Service, a vast percentage of Americans, nearly the entire bottom 50 percent of wage earners based on adjusted gross income, pay little to no federal income taxes at all. This leaves the top half of the country’s earners to pick up more than 97 percent of the income tax bill.
Additionally, the top 25 percent of wage earners in this country are shouldering over 85 percent of the income tax burden, the top 10 percent is paying almost 70 percent and so on.
So while Congress is engaged in a purely political debate over whether or not everyone is or should be paying their fair share, perhaps our elected leaders should first engage in a discussion about what “fair” really is.
I have a pretty clear-cut opinion on what I feel is fair. To me, fair would mean that each wage earner in this country paid the same proportion of his or her income, regardless of how much they earn, to support the operation of the federal government.
For example, a person who earns $1 million a year would pay $100,000 annually in income taxes. A person earning $20,000 would pay $2,000. Perfectly fair, nothing to argue.
But that does not address the matter of tax loopholes, the parts of the tax code that many argue disproportionately favor the rich and discriminate disproportionately against the poor, and that discussion has merit.
As an example, for the million-dollar earners who can deduct $100,000 a year in mortgage interest from their income and then pay 10 percent on the remaining $900,000, their effective tax rate becomes 9 percent on the $1 million they earned. The $20,000 earner, who is less likely to own a home and therefore have no mortgage interest deduction, would pay the 10 percent tax rate on their full earnings, giving them a higher effective tax rate than their wealthier counterpart.
By ending all such loopholes and deductions, everyone would be on the same level playing field, ending the debate over fairness.
Political leaders have been using our currently unfair tax system for years to create a divide among Americans to pander to particular segments of their own political parties and gain or retain political power. President Obama has been on the campaign trail in recent weeks, imploring Congress to make changes to the law where all Americans would pay their fair share.
I agree with him in part, but not on what he claims to be fair. By modifying the tax code, including the creation of a single tax rate and ending loopholes in the code that clearly favor certain taxpayers over others, we would achieve two monumental milestones.
First we would create a system where, for the first time, all Americans are truly paying their fair share of the burden. And secondly, because politicians couldn’t gain favor with voters over special tax rates and loopholes in the code, voters could elect leaders who most closely reflect their own ideals, not just ones who promise to more effectively line their pockets.