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Tax Law

Rich to Pay More in 2013 – What About 2014, 2015…?

A king ought to shear, not skin, his sheep - Robert Herrick


In the context of federal tax policy and, in particular, how much the "wealthy" should be paying, what exactly does "fair" mean? With so much debate about tax policy "fairness" swirling about the country during the past four years, I have not heard any conclusive, definite answer to this threshold question.

If the "rich" aren't paying their fair share, should we not have an objective "fair share" measurement so that this gaping social policy deficiency can be rectified?  In my mind, the national conversation cannot produce anything much beyond hyperbole without hard numbers to work with. After all, if we don't have a concrete numerical goal, how can we ever achieve and honor a recognizable standard of "fairness"?  But first, we need to know where we are in order to see how far we have to go?  Let's take a look:

2013 Tax Numbers

If we define the "rich" as families with incomes in the top 20% of the nation, did you know that this subset of Americans is projected to pay 71.8% of the nation's taxes in 2013? Or that these citizens will pay an average of 27.2% of their income in federal taxes? Or that the top 1% of American families, who command an average income of $1.4 million, are expected to pay an average of 35.5% of their income ($497,000) in federal taxes? Or that these tax burdens are about as high as they have been in the past (albeit not the very highest)?

Because these figures come from a recent Tax Policy Center analysis, we can trust them at least to the point of recognizing they are qualified as projections.  

Elements to Consider

By how much does the federal tax burden now being carried by the wealthy fall short of their fair share? To form a coherent opinion, we should note:

  1. The 20% segment referred to above earn an average income of $204,490.
  2. The Tax Policy Center study does not assign the "rich" or "wealthy" moniker to the top 20% group, explicitly or implicitly.
  3. Actually, this average income level of the top 20% must include many in the middle class because many in this group earn less than $204,490 and many also live in high cost-of-living areas where $204,490 may not guarantee the "good life."
  4. The average federal tax bill facing families with average incomes of $204,490 exceeds $50,000. This segment will pay a 2013 federal tax bill that is 4% higher than it was in 2009 (27.2%, up from 23.2%).
  5. None of the tax dollar or percentage figures recited so far includes state and local tax burdens.
  6. The TPC also says that the middle 20% earner segment of American families is actually now paying a lesser share of the federal tax burden (13.8%) than it has over the past 30 years (16%).

Questions Worth Asking

Based on the facts and figures outlined (and many more in the TPC's study), how much "wiggle" room is there in divining how much more we should expect from the well-heeled? More precisely, what effective tax rates can the "rich" tolerate? How much more revenue can the federal government generate from this resource? What are the risks and is the extra revenue worth the risk?

Reasonable minds can differ on these questions, but all will agree there is little room for error.


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