A Few Words on Taxation of the Wealthy

Chart from Visualizing Economics

Over the last 50 years the United States has repeatedly reduced taxes on the wealthy. This is a fact; the highest tax rates have steadily gone down for the last 50 years. Today the highest tax rate is 1/2 of what it was in 1980 and about 1/3 of what it was in 1963. Individual tax rates in the United States are lower than most other westernized nations, and far lower as a percentage of GDP. The wealthy also receive tax breaks other taxpayers do not qualify for. In short, the idea that the wealthy in the United States pay too much in taxes is a canard. It is refuted both by the nation's history and by comparing it to other countries.

The United States has a progressive taxation system, and has followed such a system for about 100 years, which is how long the income tax has been in place in the U.S. following ratification of the 16th Amendment to the U.S. Constitution. Progressive income taxation -- that is, a sliding tax rate where higher incomes are taxed at a higher rate -- has repeatedly been upheld under the United States Constitution, and survived challenges that it is supposedly unfair. (I should note that there are websites out there (like the humorously named American Thinker) -- and a wide body of tax protester materials -- that have silly theories of why it's illegal or unconstitutional. In short, as a lawyer I can tell you they do not know what they're talking about.)

Here's the reason why: everybody gets the benefit of lower tax rates for the lower amounts of income one earns. If hypothetically the first $10,000 of taxable income is untaxed under a progressive system, then its untaxed for everybody. If the next $10,000 of taxable income is taxed at 10%, then its taxed at 10% for everybody. If the next $10,000 of taxable income is taxed at 90% then its taxed at 90% for everybody. So, under this system if you had $30,000 of taxable income, only the taxable income over $20,000 would be taxed at 90%. These rules not only apply across the board, i.e. their equally applied so fair, but they show the complaint isn't really that others are taxed at a lower rate -- they weren't -- it's that one's own income is taxed at different rates as you earn more. Complaining about that is sorta nutty. Just to verify for you, here are the US tax tables.

As should be obvious, as far as government goes, you get what you pay for. A government that is well funded is able to provide good services; one that is driven to poverty provides poor services. This is not rocket science. The table, top right above, for example, correlates with the fact that higher tax rates helped us climb out of the depression, recover quickly from World War I and then World War II, and led to periods of great prosperity in the United States.

Drastically cut tax rates eventually harmed us greatly. The idea that adequately funding government wastes money is badly misinformed.  There is a direct correlation between the highest tax rate and how effectively our government functions.  There is nothing illegal, immoral, or unfair about taxing higher amounts of income at higher rates. The Republican position is factually inaccurate and fiscally irresponsible.

Much of this post was contained in my much lengthier post covering many different related subjects, Why I am Not a Republican.