Should we tax the rich more?

Numbers in Tax Contributions and Tax Rates

In 1999, the federal individual income tax rates under Bill Clinton—for heads of household: 15%, 28%, 31%, 36% and 39.6%.

In 2005, the federal individual income tax rates under George Bush after the so-called Bush tax cut—for heads of household: 10%, 15%, 25%, 28%, 33% and 35%.

Democrats would want you to think the rich would contribute more (i.e. fair shares) when the top rate is higher. Let us look at the total contribution of taxes paid by different group of incomes.

In 1999:

—the top 20% paid 65.6% of total individual income taxes collected by IRS

—the middle 40% paid 28% of total individual income taxes collected by IRS

—the bottom 40% paid 6.3% of total individual income taxes collected by IRS

In 2005:

—the top 20% paid 68.8% of total individual income taxes collected by IRS.

—the middle 40% paid 26% of total individual income taxes collected by IRS.

—the bottom 40% paid 5% of total individual income taxes collected by IRS.

Moreover, if we go back to 1979 in the Jimmy Carter era, the top rate was 70%, we would see even more drastic results.

In 1979:

—the top 20% paid 56.4% of total individual income taxes collected by IRS.

—the middle 40% paid 34.2% of total individual income taxes collected by IRS.

—the bottom 40% paid 9.3% of total individual income taxes collected by IRS.

Taxing the rich more means more taxes being shared by middle class

How is it possible that when tax rates are higher, the top income group pay less into the total taxes collected—consequently, more tax burden on the middle group.

One possible reason is the business owners/investors change their investing behaviors when tax rates are raised—for example, they shift their taxable investment to tax-free investment. Higher tax rates also mean less potential return on investments—investors are less motivated to invest and therefore less capital gains to be taxed. When this happens, it will affect job creation.

So when Obama says he wants to tax the rich, we should understand that means more tax burden on the middle class which has been buried the last four years as Joe Biden admitted. Also, they project that if Obama gets the tax rates he wants, the additional tax revenue for each year will be about $80 billion—a drop in his $1 trillion annual deficit bucket. This projected tax revenue only occurs if the rich won’t change their investing behaviors—history, however, has proven the opposite.

Ch3 Nguyen

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5 comments on “Should we tax the rich more?

  1. The more you make, the more you loose, so the rich will stop investing or hiring or expanding their business and it will always hurt middle class and the consumers. Where I work , all the positions are freezing, whoever left or retired, administration doesn’t replace them. We end up to work more and stay late; of course, we are tired and burned out and less effective. Who’s suffering? the workers and the consumers. This recession is too long to endure. Tax the rich is not the answer, cut spending and live within your budget are the one and stop blaming Bush

    • Exactly. Raising tax is not the answer. Cutting wastes in government should be. Government size has increased faster than the growth of the population the last decade.

  2. More spending, taxing and wasting will stimulus economy ?Did you hear Obama’s new fiscal cliff plan? Give me a break, I’m going to work less from now on, I have no “stimulation” to work overtime so Obama can’t rip me off . By the way Nguyen, if you or your family are planning to travel to Eastcoast, let me know , we’re going to treat you Philly cheese steak or “banh xeo” (Vietnamese pan cake).

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