For years, the left has tried to perpetuate the falsehood that the wealthy are not paying their “fair share” of America’s income tax burden.
During the past few weeks, President Joe Biden and several congressional Democrats have hammered this talking point, claiming that if the so-called wealthy simply paid their “fair share,” the Democrats’ $3.5 trillion Build Back Better Act would be fully funded.
Astonishingly, President Biden and many Democrats have even gone so far as to claim that their $3.5 trillion budget reconciliation bill would cost $0 if only the wealthy would pay their “fair share.”
According to Mr. Biden, “I’m sick and tired of the super-wealthy and giant corporations not paying their fair share in taxes. It’s time for it to change.”
Rep. Alexandria Ocasio-Cortez (D-NY), who wore a “tax the rich” dress to the Met Gala, replied to Mr. Biden’s statement, saying, “Couldn’t agree more. Taxing the rich will help us expand Medicare, extend childcare, take action on climate, and so much more.”
Yet, despite Democrats’ calls to soak the rich, the rich are already paying much more than their “fair share” of America’s total tax burden.
For example, in 2018, the top 1 percent paid a whopping 40.1 percent of all federal income taxes. What’s more, in 2001, the top 1 percent’s total federal income tax share was only 33.2 percent. It has increased steadily for the past two decades.
And, according to the Tax Foundation, in 2018, “the top 1 percent paid a greater share of individual income taxes (40.1 percent) than the bottom 90 percent combined (28.6 percent).” Moreover, “The top 1 percent of taxpayers paid a 25.4 percent average individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.4 percent).”
So, the top 1 percent paid 40 percent of America’s total income tax burden in 2018. On average, they paid a significantly higher income tax rate than the vast majority of all other Americans.
Yet, according to Mr. Biden and the vast majority of Democrats, they are shirking their tax burden. As Mr. Biden would say, “c’mon, man.”
Making matters even more evident, the top 10 percent paid 71.4 percent of total income taxes in 2018. Remarkably, the top 25 percent of all income earners paid 87 percent of total income taxes in 2018.
However, according to the left, the rich aren’t paying their fair share.
Interestingly, Democrats quickly point to European nations as their model for how a social welfare state should be constructed.
Yes, many European nations have robust entitlement programs, including “free” college and “free” pre-K. But, the same Democrats who are pushing for European-style nanny state programs fail to explain that “wealthy” citizens do not pay for those programs, all citizens do.
Although those on the left supporting Biden’s Build Back Better agenda would have you believe that America’s tax system is less progressive than most of our European counterparts, the exact opposite is true. In fact, most European countries spread their national income tax burden broadly across society, whereas in the United States, the top 10 percent shoulder the vast majority of the income tax burden. Indeed, many European nations have flat tax systems.
The European tax system also includes the Value-Added Tax (VAT), which is a consumption tax paid by all consumers on goods and services. In European countries, VAT taxes range from 17 percent to 27 percent.
If the Democrats pass Biden’s Build Back Better Act, a VAT would likely be enacted in the United States thereafter. Ironically, implementing a VAT in the United States would help fund the Build Back Better plan over the long term, but it would also disproportionately impact those at the bottom rungs of the income ladder.
Make no mistake, the wealthy pay their fair share. They have been for decades. But if Democrats want to transform America into a European-style welfare state, they would absolutely need to raise more revenue from the middle- and working classes, who would actually foot the bill for the Democrats’ cradle to the grave welfare state.
• Chris Talgo (firstname.lastname@example.org) is senior editor at The Heartland Institute.