Heading into Tax Day, if you listen to progressive policymakers for a few minutes, you’ll likely hear that few problems on Earth can’t be solved by “taxing the rich.” Want to nationalize healthcare? Tax the rich. Want to close the deficit? Tax the rich. Need a ball gown for the Met Gala? Tax the rich. Unfortunately, legislators not invited to fashion shows should look elsewhere for real solutions to America’s fiscal challenges.
Let’s start with the basics: the federal tax code is already one of the most progressive in the world. According to the Joint Committee on Taxation, the U.S. tax code is highly progressive, with the bottom 50 percent of U.S. taxpayers facing an average federal tax rate of 6.8 percent. In comparison, the top 1 percent pays about 5 times that amount, at 34 percent. Note that these measures include all federal taxes, including payroll taxes, which are generally regressive, and the corporate tax, which JCT assumes primarily falls on higher-income earners.
Compared to our peers, the U.S. tax code has generally been more progressive than any other in the developed world. While many European nations raise more revenue overall, they do it by taxing everyone — including low-income households — at the register through value-added taxes. In contrast, the U.S. leans heavily on progressive income and payroll taxes, disproportionately hitting high earners.
It’s also progressive relative to income. According to the IRS, the top 1 percent earn 22 percent of total income but pay more than 40 percent of the nation’s income taxes. By contrast, the bottom 50 percent of earners collectively pay a negative share of income taxes, mainly due to refundable credits like the Earned Income Tax Credit and the Child Tax Credit. Note that these households do face other taxes, and these outcomes are by design.
The basic facts of the U.S. tax system reveal that those arguing in favor of a progressive tax system have already won — that’s what the United States has today.
What the United States does not have is a massive welfare state to match those of many European nations to which so many U.S. progressives aspire. The overall level of U.S. taxation is comparatively low. For instance, in France, the government collects 43 cents from every dollar earned, compared to about 25 cents in the United States.
U.S. progressives tend to hide the ball on this front. When Sen. Bernie Sanders released his Medicare for All financing plan, it came with a buffet of new taxes: a 52 percent top income tax rate, a new wealth tax, higher corporate taxes and more. Yet, even with all that, it still came up trillions short. That was to fund one new program.
When it comes to fixing the structural deficit, the math gets worse. Manhattan Institute economist Jessica Riedl estimates that taxing the rich to the “maximum sustainable extent” — raising top income tax rates, taxing capital gains as ordinary income, implementing a wealth tax, closing loopholes — would increase, at most, 1 percent to 2 percent of GDP.
Yet, the Congressional Budget Office projects deficits will average 6 percent of GDP in the 2030s and climb toward 9 percent by 2054. Under more realistic assumptions, the deficit is likely to be 14 percent over the long term. The gap between what progressive taxes can raise and what the government is projected to spend isn’t just large — it’s unbridgeable.
The problem isn’t tax revenue. It’s spending. Historically, federal revenues have averaged about 17 percent of GDP. Even without new laws, they’re projected to rise to nearly 19 percent. But spending is on track to hit, conservatively, 27 percent of GDP by 2054. And it’s not because of military or discretionary spending. The drivers are Social Security, Medicare and interest on the national debt.
There is no path to long-term fiscal solvency that does not run through spending reform. The numbers are too large, the obligations too dominant, and the demographics too unfavorable to pretend otherwise.
Taxing the rich may be a helpful applause line. But on this Tax Day, remember that as a governing strategy, it doesn’t come close to solving the problem. Eventually, lawmakers must say the quiet part out loud: the federal government doesn’t have a revenue problem. It has a spending problem — and the longer we ignore it, the harder it will be to fix.
Gordon Gray is Executive Director of Pinpoint Policy Institute, a nonprofit that promotes and defends the essential pillars of American prosperity. He wrote this for InsideSources.com. He wrote this for InsideSources.com.
Reprinted with permission from DC Journal by Gordon Gray.
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
The last two lines of this article says it all.
Dems/Prog/Libs/Socialists do not care about the Debt. They want MORE taxes to SPEND more $$ on MORE programs that weaken the citizens will to work. Power, Debt? doesn’t matter – print more $$ create more programs to keep the problems alive. Dems HOPE and PRAY and WORK to destroy the economy.
“Tax the rich” EXCEPT those rich socialists like Soros, Bernie, and the Bidens who have figured out how NOT to be taxed by hiding or manipulating their accounts!
How many more centuries and revolutions will it take before the simpletons understand that taxing the rich is not a solution but making the “poor” work is.That deliberately creating the permanent underclass is destructive to any state.
Tax is a very strong and simple incentive for the left.
What ever they want to destroy: THEY TAX IT!
Remember when Burnie was all for taxing millionaires. Now he’s worth several millions. He calling to tax the billionaires. You can’t make this stuff up.
When dems say tax the rich, they consider anyone with a job to be rich.
Maybe the Democrats should make sure their richest comrades are actually PAYING their taxes. Seems to me there have been a “few’ rich Dems who do and did not pay their taxes. Lets’s start with Hunter Biden. We also would not need to collect so much money with taxes if the DC and State Democrats would stop wasting our tax dollars on their crazy pet projects!! The amount of fraud and corruption that DOGE has already uncovered is astounding!
The easiest solution, as has been frequently stated in the past, is to go to a fixed flat percentage of income tax. That way we all pay the same percentage across the board – and no loopholes or deductions for anyone allowed no matter what their financial status is.
The Rich are already paying all of the Income Tax. Taxing the Rich more will only make the Rich poor and will not solve anything.
Our biggest enemy the Democratic Party has been stealing the American tax payer money like water! They hide the money line their pockets give it to the elitist, etc! The Democratic Party are like snakes and they must pay for what they have done to our country! You want fair tax, stop all tax write offs, base the tax on 10% of the gross income, anyone who tries to hide the money or cheat the system should have to forfeit all their wealth no exceptions!
Flat tax . Quit the wasteful , corrupt spending .
It always is a spending problem. Americans don’t pay on average very little tax with all the deductions they are allowed. When they started taxing interest on savings I thought it was very unfair. Still feel that way. Taxing social security money that had been taxed once already is also unfair. I hope Trump can get that passed, no tax on SS. Look how much Biden spent on Built Back Better and nothing was built but a bridge to nowhere and a heated sidewalk in Vermont. How did Vermont get to be so lucky. How many states were chomping at the bit for one of those??? All that USAID for trans operas and condoms and sex changes and, trans booklets for the youth of Brazil. Gay Sesame Street show for Iraqi tv watchers. Only 20 million cost. All this and much much more could have been used to pay down our debt this year and next year and for years after that. It would have been better spend that way than all these unnecessary trans ideas. But not according to the dems. Elon is taking the money that used to go to trans, for what? to become rich, they say. Psst dems HE IS ALREADY RICH. He has sofar saved the taxpayers 150 billion dollars in just under 100 days. Go Elon and your crew. Kudos to all of you.
The one I love the most that they love to use is they have to pay their fair share! Who decides what is a fair share? And most of the Democrats are millionaires. AOC works at job that pays $175,000 a year and she’s worth 29 million where did that money come from
We need to get rid of the elite’s idea that getting one’s hands dirty doing manual/skilled work is demeaning. The economy demands it. We produce very little here compared to what we did prior to 1970–pretty good rough date for when the idea of making/producing things became a dirty word. All of our homes are filled with goods that were made somewhere else; we don’t build appliances, make clothes, kitchenware: even the ships that bring us our purchases are all made overseas. Trump is right, but he needs to use the idea the US should be a player in every genre of product, from personal to commercial.
People with common sense, like myself, realize that “rich” people DO in fact pay more taxes. Especially after Trump tax cuts of 2017! The left has been spewing this tax cuts for the rich scenario for so long, people have started to believe it. Especially the socialists, like Bernie Sanders, who is a millionaire. I’m sure HE isn’t complaining. Most people get into Congress then become millionaires. Why is that? Insider trading? Graft? I’d really like to know. Hopefully DOGE eventually traces these money pipelines and figures it out. The “left” needs to STOP lying and the Republicans need to STOP BEING SO DARN NICE!!! Call them out, use the word :lying” because THAT is what they are doing!!!!
Most “Rich” own businesses. Increase their tax burden, they will adjust by cutting back. This could mean layoffs for workers, all the way to closed businesses. That’s bad for the average “not rich.”
The stupid leftists who think that taxing the rich will bring in more money ignore the fact that the rich can afford to leave the country and offshore their wealth. Once all the richj people are gone and their money is out of the country – then what?
It’s usually people that are lazy or that lack motivation that simply want to “tax the rich”. I am nowhere near wealthy, not even close, but never agreed with this ridiculous concept. How about people opening businesses again, or working 2 jobs, like many of us did for years. Sure, some things are not always fair, but “blaming” rich people for any shortcomings is ridiculous. In America, anyone can become rich, it’s a matter of hard work, dedication, and sometimes LUCK. If you’re sitting at home typing on your computer, the chances of becoming rich are slim. Go-getters usually create their own luck.
Its very simple: Money = Power
Democrats want all the power and all the control. In order to put themselves in power unopposed forever, they need to control your health care (oops, sick opposition people seem to die younger), take away your guns (so nobody can fight back), shut down free speech, destroy the family (to control and indoctrinate the kids), control food production (they’re already buying the farmland), and take the money/power away from everyone NOT on their team.
When you look at EVERYTHING the democrats are doing (not saying), it all aligns with these principles.
Try reading the article first! Your “point” was the first thing totally refuted!
Oh YOU Again…. I Can Just…Imagine Your Commonalities…With the Rest of Your Fruits & Nuts.
The Dems ignored the fact that It includes them too, since they got rich while in office.
DOGE will find them.
you’re partly right,start collecting from the clintons,obamas,bidens,pelosis,schumer & the rest of their crooked ilk.
New York Nationals, you are drunk on that kool-aide! I will guaranty that if you had millions /billions in net worth, you wouldn’t say, hey why don’t you tax me 50%, I worked for my wealth, it wasn’t handed to me but I’m happy to be taxed at the rate of 50%!
I agree that spending is the problem. But we’re not going to win the spending war by cutting low-hanging fruit from DOE, IRS, USAID, and the like. 86% of the dollars are in Social Security, Medicare, Medicaid and Defense. I’m not sure how many AMAC readers consider Social Security, Medicare, and Medicaid the “welfare state.”