There is something troubling about the way our side is using statistics in this. If the “top 1%” pay 38% of taxes but have, for argument’s sake 45% of the total aggregate income, then indeed it is reasonable to argue they are “not paying their fair share”. Of course, the other side isn’t trotting out the figures to make that case, so I suspect it’s not true.
Still, the fact that the wealthy are adept at finding and using tax shelters makes such a circumstance conceivable, if one includes tax exempt income in the aggregate income calculation, and even if the “rich” as a group are on any reasonable calculation paying “their fair share”, some, who have gone to the greatest effort to game the tax system, rather than putting their wealth to uses that maximize pre-tax profit and likely are more beneficial to the economy, arguably are not.
The cure is, of course, not to raise the top marginal rate, which harms capital formation, but to curtail tax shelters. I personally do not advocate abolishing any of them, simply limiting the amount of income that can be excluded from taxation by any combination of deductions, tax-exempt sourcing or credits (a credit functionally excludes an amount of income equal to the amount of the credit divided by the top marginal rate). I’d allow unlimited deductions for charitable contributions, as these support the function of civil society in doing things that are better left outside state control, but other than that, I’d limit the amount of income which could be excluded from taxation to $250,000 for individuals, $500,000 for married couples, and $100,000 for those who can be claimed as dependents, with the unused portion of a dependent’s un-taxed allowance transferring to the parent or guardian. I’d abolish the AMT, which was an unnecessarily complicated attempt at this sort of idea.
Curtailing tax-shelters is probably the one and only policy move that can be simultaneously seen as “soaking the rich” while being pro-growth and not punishing achievement: it just forces those who have achieved financial success or inherited wealth to put their capital to more productive use, rather than going to lots of effort to hide if from taxation.
"In 2008, the most recent year for which full data is available, the infamous top 1% – those earning over $380,354 – paid 38.02 percent of federal income taxes, according to an analysis of IRS data by the Tax Foundation."
And
"The top 1 percent, for instance, earned 20 percent of the nation's adjusted gross income in 2008"
Is your answer.
“If the “top 1%” pay 38% of taxes but have, for argument’s sake 45% of the total aggregate income, “
Go back and re-read the article. The top 1% do NOT have 45%, but only 20% of the total income.
The AMT came in to existence by:
The AMT was enacted by the Tax Reform Act of 1969[15] and went into effect in 1970. Treasury Secretary Joseph Barr prompted the enactment action with an announcement that 155 high-income households had not paid a dime of federal income taxes.[16] The households had taken advantage of so many tax benefits and deductions that reduced their tax liabilities to zero.[17] Congress responded by creating an add-on tax on high-income households, equal to 10% of the sum of tax preferences in excess of $30,000 plus the taxpayer’s regular tax liability.[18]
So because congress was unhappy that 155 wealthy people - out of millions - hadn't paid income tax that year they made a special law to target them. And over time that law ensnared millions of regular taxpayers... How long to you think it will be before your plan for hitting the "wealthy" hits everyone else? In 50 years the dollar may be worth zip and an income of $500,000 a year be that of a fast food cook...
Repeatedly those who try to selectively whack the wealthy end up whacking everyone else - in more ways than one.