United States Needs Taxes to Run; Why Won't the Richest Pay

United States Needs Taxes to Run; Why Won't the Richest Pay

Adam Smith (1723-1790), a man upon whose writings and philosophy America was built, said: "The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities ; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."

After all, taxes pay for everything that we Americans love and need to survive as a country: the military, teachers, emergency personnel, interstate highways, national parks, space exploration, and fireworks on the 4th of July.

If Adam Smith is right, corporations which enjoy the most protection form the government should shoulder the biggest tax burden,  Then, naturally, the richest individuals should follow closely behind.  Instead, according to a Bloomberg BusinessWeek study, 100 of the 500 largest corporations paid less than 16% of their earnings to the IRS over the latest 5 year period.   Some of these companies include: Coke; Ford; General Electric;  Boeing, Southwest Airlines.  In addition, in its August 2008 report, the Government Accountability Office estimated that "[t]he average U.S. effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2 percent."

Taxes aren't flowing in from the richest Americans either.   Under Eisenhower, the richest American paid a 90% top tax rate!  Now, according to the IRS, taxes on the wealthiest are at the lowest level they have been since the Great Depression.  Over the 12 years to 2007, tax rates for the richest 400 Americans were effectively cut in half.  In 1995, the richest 400 Americans paid, on average, 29.93% of their income in federal taxes.   In 2003, it was 23%.   In 2007, the last year for which the IRS has released data, the richest 400 Americans paid just 16.63%.

At the same time, the total income of the richest 400 Americans skyrocketed.  In 1995, the combined income of the richest 400 was just over $6 billion. By 2007, the combined income of the richest 400 was almost $23 billion.

Regrettably, it appears that many in the  country have embraced the ideals of J.P. Morgan (1837-1913): "Anybody has a right to evade taxes if he can get away with it. No citizen has a moral obligation to assist in maintaining the government. If Congress insists on making stupid mistakes and passing foolish tax laws, millionaires should not be condemned if they take advantage of them."

The only difference now with J.P. Morgan's time is that the Americans and American corporations living by his idea are not millionaires, they are billionaires.

Read more articles about consumer debt by Ted Connolly, co-author of The Road Out of Debt

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