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Politicians exploit public ignorance. Few areas of public ignorance provide as many opportunities for political demagoguery as taxation. Today, some politicians argue that the rich must pay their fair share and label the proposed changes in tax law as tax cuts for the rich. Let’s look at who pays what, with an eye toward attempting to answer this question: Are the rich paying their fair share?

According to the latest IRS data, the payment of income taxes is as follows. The top 1 percent of income earners, those having an adjusted annual gross income of $480,930 or higher, pay about 39 percent of federal income taxes. That means about 892,000 Americans are stuck with paying 39 percent of all federal taxes. The top 10 percent of income earners, those having an adjusted gross income over $138,031, pay about 70.6 percent of federal income taxes ( About 1.7 million Americans, less than 1 percent of our population, pay 70.6 percent of federal income taxes. Is that fair, or do you think they should pay more? By the way, earning $500,000 a year doesn’t make one rich. It’s not even yacht money.

But the fairness question goes further. The bottom 50 percent of income earners, those having an adjusted gross income of $39,275 or less, pay 2.83 percent of federal income taxes. Thirty-seven million tax filers have no tax obligation at all. The Tax Policy Center estimates that 45.5 percent of households will not pay federal income tax this year ( h8ks4ge). There’s a severe political problem of so many Americans not having any skin in the game. These Americans become natural constituencies for big-spending politicians. After all, if you don’t pay federal taxes, what do you care about big spending? Also, if you don’t pay federal taxes, why should you be happy about a tax cut? What’s in it for you? In fact, you might see tax cuts as threatening your handout programs.

Our nation has a 38.91 percent tax on corporate earnings, the fourth-highest in the world. The House of Representatives has proposed that it be cut to 20 percent; some members of Congress call for a 15 percent rate. The nation’s political hustlers object, saying corporations should pay their fair share of taxes. The fact of the matter—which even leftist economists understand, though they might not publicly admit it—is corporations do not pay taxes. An important subject area in economics is called tax incidence. It holds that the entity upon whom a tax is levied does not necessarily bear its full burden. Some of it can be shifted to another party. If a tax is levied on a corporation, it will have one of four responses or some combination thereof. It will raise the price of its product, lower dividends, cut salaries or lay off workers. In each case, a flesh-and-blood person bears the tax burden. The important point is that corporations are legal fictions and as such do not pay taxes. Corporations are merely tax collectors for the government.

Politicians love to trick people by suggesting that they will impose taxes not on them but on some other entity instead. We can personalize the trick by talking about property taxes. Imagine that you are a homeowner and a politician tells you he is not going to tax you. Instead, he’s going to tax your property and land. You would easily see the political chicanery. Land and property cannot and do not pay taxes. Again, only people pay taxes. The same principle applies to corporations.

There’s another side to taxes that goes completely unappreciated. According to a 2013 study by the Virginia-based Mercatus Center, Americans spend up to $378 billion annually in tax-related accounting costs, and in 2011, Americans spent more than 6 billion hours complying with the tax code. Those hours are equivalent to the annual hours of a workforce of 3.4 million, or the number of people employed by four of the largest U.S. companies—Wal-Mart, IBM, Mc-Donald’s and Target—combined. Along with tax cuts, tax simplification should be on the agenda.


Walter E. Williams is a professor of economics at George Mason University.

Print Headline: Who pays what?

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  • RBear
    October 19, 2017 at 7:37 a.m.

    Williams once again only looks at the surface of issues and never really digs into the details. He starts with a narrative position and only gets what data he needs to support his outlandish points, then walks away as if that's all that's required to understand the issue. This is what we have here in this sloppy rambling on taxes.
    Williams makes the claim that 45.5% of Americans will not pay taxes this tax season. That's based on a superficial number from the Tax Policy Center, as if to say we have a bunch of freeloaders. But what's missing from that claim are the details which tears down his argument.
    Of that figure, only 18% truly pay no tax at all. The rest pay a payroll tax such as SSI or Medicare which arguably contributes to the largest expenditure in our nation's budget. The rest have incomes so low that the tax credits are necessary to allow them to survive. In other words, without the tax credits they would spend most of their income satisfying the federal government bill.
    With regards to corporate taxes, Williams conveniently leaves out the tax loopholes many corporations take advantage of that significantly reduce their tax bill. Just ask Trump about those loopholes.
    So, with all these flaws in Williams arguments I'm not really sure what point he's trying to make. Of course, there will be those on the right who will extol the virtues of Williams' wisdom without even digging into the details. They disdain Google as a good source of information and prefer to just wallow in the pile of misinformation put forth by Williams. They are ... the TRUMP DEMOGRAPHIC.

  • PopMom
    October 19, 2017 at 9:25 a.m.


    Yes. You are correct about payroll taxes, and the poor also have to pay sales taxes and in some cases property taxes. His analysis is worse than that. The proposed changes will not help the professionals who are heavily taxed. They only will help the true multimillionaires and billionaires by getting rid of the estate tax. In addition, there is some new loophole by which certain high income individuals can become "corporations" and be taxed at the new rate. Under the new changes, taxes actually will go up on the professionals be eliminating some deductions. My husband did the math, and our taxes will go up $20,000. Trump's will go down $1 billion by elimination of the estate tax.

  • Packman
    October 19, 2017 at 11:28 a.m.

    Hey RBear - Either you're lying or your reading comprehension is level MORON. Dr. Williams specifically noted "federal income taxes". Facts are facts. "About 1.7 million Americans, less than 1 percent of our population, pay 70.6 percent of federal income taxes." As to fairness, this seems pretty damn unfair!

  • RBear
    October 19, 2017 at 12:28 p.m.

    Pack the moron. So you're going to tax my 80+ year old mother because you think it's unfair. Good one.

  • hah406
    October 19, 2017 at 1:30 p.m.

    Packman I think you misread Dr. Williams piece here. It says that the top 10 percent of earners pay 70.6 percent of the taxes. Unless you meant that the top 10 percent of earners equal one percent of the total population, which might be the case. On a different note, I am OK with that 20% corporate tax rate IF congress closes ALL of the corporate loopholes. Those loopholes result in a much lower effective rate than the current one on the books for virtually all corporations.

  • mozarky2
    October 19, 2017 at 2:27 p.m.

    Corporations don't pay taxes.
    Corporations collect taxes.
    Taxes are simply a cost of doing business.

  • TimberTopper
    October 19, 2017 at 2:43 p.m.

    moz, for the most part your statement is correct. There are some businesses that don't do their own pricing to the public, so they have no way to build in that total tax burden. However those that price there goods or services can all build it in especially the retail giants.

  • WhododueDiligence
    October 20, 2017 at 9:07 a.m.

    Williams said, "Thirty-seven million tax filers have no tax obligation at all."
    They pay no federal income tax because they have very low income. That 37 million includes low-income elderly retired people who struggle to pay for their medications. What amount does Williams want to take out of their hides so they have some skin in the game?
    Speaking of no skin in the game, during the presidential campaign it was widely reported that Trump had zero federal income tax obligation for about umpteen years after he filed a one-year loss of almost a billion dollars. What did Trump supporters (including some high-profile Trump supporters) say then? The gushed about what a brilliant genius businessman Trump was to have a zero tax obligation. Never mind that their brilliant genius businessman somehow managed to lose nearly a billion dollars in one year. And these Trump supporters never want to see Trump's income tax statements. They don't care where in the world he has loan payment obligations now.

  • WhododueDiligence
    October 20, 2017 at 9:14 a.m.

    Williams wails, "By the way, earning $500,000 doesn't make one rich. It's not even yacht money."
    Wow. Both of those statements are highly questionable. How much does Williams want to take out of the hides of low-income poor and/or elderly people so people making 500 grand a year or more can get a big tax cut and party on a bigger yacht?

  • WhododueDiligence
    October 20, 2017 at 8:53 p.m.

    Correction of quote: "By the way, earning $500,000 a year doesn't make one rich."