Current Tax Rates Favor Wealthy

The rich get richer while the rest struggle to maintain. That needs to change.

According to Forbes magazine, the combined net worth of America’s 33 richest citizens is $689 billion. This total is just slightly more than the combined net worth of the entire lower HALF of the US population.  In other words, if 157,000,000 Americans paid all their bills, sold everything they own, and put all that money into one big pile, they still wouldn’t have as much money as those 33 people.

It would take about 2500 filled-to-capacity Metrodomes to hold half the US population.  Think about how it would be to walk into each one of those 2500 stadiums and look at all those people.  Imagine the millions of hours of work they do every day.  I don’t think there’s any way the efforts of 33 people, no matter how hard they worked or how talented they are, could equate to the efforts of those 157 million people.  And yet, our economy and tax system has rewarded the two groups equally.

The average net worth of the lower 75% of Americans has remained stagnant for the past twenty years. Forbes says, “The very richest, meanwhile, have seen rapid gains in their wealth. In today's dollars, the Forbes 400 Americans had net worth of $480 billion in 1990. The people in that group today have more than three times that level of wealth.”  Essentially all of the new wealth created in our country since Reagan was elected has gone to the wealthiest 10% of the population.

Why has this happened?  Some of it has to do with technology that makes it easier and easier to quickly sell and distribute popular products to billions of people.  But it’s also happened because of our unfair tax system.  Most of the money made by the very wealthiest Americans comes from capital gains (profits from investments), not from salaries or business income.  The federal tax rate on long-term capital gains is 15%.  That’s the same rate paid on taxable work income of over just $8500 per year.

Fifteen percent is well below the tax rates paid by middle-class households.  For 2011, my wife and I paid 25% federal income tax on some of our income. My wife also paid 13.3% self-employment tax on her half of our income and I paid 5.65% payroll tax on my half.  Once we hit $69,000 in taxable income, we paid more than thirty cents in federal tax for every additional dollar we made.  Compare
that to Mitt Romney who reported no income from wages, but $6.8 million from capital gains.  Romney’s tax rate on that $6.8 million was less than half the rate we paid on our income over $69,000. That’s how the wealthy get wealthier while the lower and middle classes get nowhere.

Two things should be done immediately to bring some fairness back to our tax system.  It was only fifteen years ago that the long-term capital gains tax rate was a more reasonable 28% rather than the current 15%.  It should be changed back to the pre-1997 level.  Second, high income earners should pay Social Security tax on all of their income – not just amounts up to $106,800. This revenue could be used to permanently fund the temporary 2% rate drop implemented by Obama.

Republicans like to label as un-American or socialist those seeking to rebalance the nation’s distribution of wealth.  But what did they call it when taxes on the rich were lowered?  That also affected the distribution of wealth.  In fact, ANY money government spends or collects results in a redistribution of wealth. Certainly Romney and other Republican leaders understand this.  They  simply throw out words like “socialist” and “un-American” to scare people away from the topic. 

Fact is the rich keep getting so much richer while the rest of the population struggles to maintain.  Romney places the blame for this situation on the people who are struggling.  He thinks they’re content to live on government handouts rather than taking responsibility for their own lives.  Don’t believe that for a second.  The disparity in wealth began growing with Reagan’s trickle-down tax policies and it hasn’t let up since. People are working just as hard now as they were thirty years ago.  To blame them while continuing to promote tax policies that favor the wealthy is not only offensive, it’s disingenuous.

It’s simple common sense: tax policies favoring the rich have created a situation in which the combined wealth of 33 Americans equals the combined wealth of 157,000,000.  It’s time we reverse that trend.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Liberaltarian September 25, 2012 at 01:45 PM
Low wage workers pay a higher percentage of their income for social security taxes than very high income earners. They pay sales taxes, property taxes, gas taxes, cigarette and liquor taxes, plenty of taxes. They don't pay much if any income tax because they don't have much income. I'm not concerned about my lifestyle and I don't feel entitled to the fruits of another person's labor. However, our government spends more than it collects. I'm suggesting that we look to the people who have seen the largest tax cuts and whose wealth has skyrocketed over the past thirty years to help remedy this situation. That seems fair to me.
Orono September 25, 2012 at 06:18 PM
Chris, You are a fraud. You begin this piece talking about the 33 richest people in America. When you get into specifics, you use Mitt Romney as your example. Sorry Chris but Romney isnt close to the top 33. He isnt even a billionaire. Second, Romney paid 14% last year and according to my math, that is MORE than half of the 25% you paid. Clearly this isn’t a tax reform argument but simply a Romney/Republican hit piece. Romney definitely wants lower taxes and less government. But, Romney wants tax breaks for everyone - including you. How is this a bad thing? One of the reasons I am successful today is because I SAVE and INVEST my money. Even when I made less than you, I still managed to save and invest. The less taxes I pay the more money I save or invest. This philosophy works for you too. The problem is that you need to look at yourself and not your neighbor. Instead of worrying how much I save on a tax break, look how much you save. Why do you care if I save $1000 while you save $100? I pay nearly 10X more in taxes than you make. Shouldnt I get a larger break? Be honest, Chris. You have no interest in creating a better tax system that is fair for everyone. You are only interested in redistributing the wealth. What makes that wrong is that you are only interested in redistributing MY WEALTH. You want a tax system that is fair ONLY to you. America provides everyone an equal opportunity to be as unequaled as they choose to be.
Liberaltarian September 26, 2012 at 01:34 AM
I didn't mean to imply that Romney was in the top 33. If he's not a billionaire, then he's not even in the same league as the top 33. We didn't pay 25% income tax on all of our income - just our taxable income over $69,000. When I compared Romney's tax rate to mine, I was including social security and medicare taxes. I'm glad you save $1000 when I save $100. I HONESTLY admire that. But the money you make from the money you saved IS income. That income should be taxed at the same rates as income earned from working. I do want a tax system that's fair to all. Where do you get off calling me a fraud? I put my real name on everything I write. If I'm a fraud, let people who know me call me out. Otherwise, you should assume my motives are sincere in the same way I do yours. And finally, what evidence do you have that America provides everyone with an equal opportunity? When I taught school in Georgia, I visited a student's house with a dirt floor. My student was 15 and just had a baby. This family was poor like in a third-world slum. America will give that baby an opportunity. But that baby DID NOT have an equal opportunity with everyone else. It wll be much harder and far less likely for that baby to become Bill Gates, "Orono", or even Chris Mau than it was for any of us.
Shawn Aune February 12, 2013 at 11:44 PM
Should you get a larger break? Absolutely not. You are somehow under the assumption that there is enough "wealth" in the world for everybody to live like you do assuming they made the same choices you did. Truth is the world is finite. If you make more there is less for everybody else. So no, you should not get a larger break. Instead you should pay a much larger portion of what you're calling "wealth" because you're receiving way more than you need to live.
Roy Roscoe March 12, 2014 at 05:11 PM
Shawn the world is not finite. There have been Billions created since the article was written. You could pay more taxes too if you had bought Netflix or Tesla. Quit whining!


More »
Got a question? Something on your mind? Talk to your community, directly.
Note Article
Just a short thought to get the word out quickly about anything in your neighborhood.
Share something with your neighbors.What's on your mind?What's on your mind?Make an announcement, speak your mind, or sell somethingPost something
See more »