The first thing that must be affirmed when discussing the issue of taxes - and of the tax rate on the wealthy - is that taxes are not only necessary but important to the economic health of this country. Vice President Joe Biden was derided when, in the lead-up to the 2008 election, he said that paying taxes is doing your 'patriotic duty.' Yet he was correct. While it can be argued that individuals don't get a full return from the government on their tax money (i.e. people paying in half a million dollars don't get half a million in benefits back), what can't be argued is that everyone gets something back in return for the money they send to the IRS.
Additionally, I firmly believe that corporate and personal tax loopholes should be closed. Much of the following discussion revolves around use of the word 'fair', and the main problem with loopholes is that they lead to an unfair playing field. They lead to a massive advantage for the wealthy - who can afford to pay someone to find and exploit the loopholes - and put the less advantaged - who can't - at a loss. This not only sends a horrible message to the middle class, it also leads to frustration and mistrust of the government. How can a government that claims to look out for the average middle-class family allow wealthy corporations and individuals to legally skirt the rules without any repercussion?
When it comes to tax increases, however, much of the talk from the left regarding tax increases involves constant use of the word 'fair'. We hear it every time the issue of raising taxes comes up, that the the wealthy need to pay their 'fair' share. What I have never heard from the left, however, is what they mean when they say 'fair.' One definition of the word is 'in accordance with rules.' I would argue that anyone paying in taxes what they legally owe is doing so in a 'fair' manner by that definition. Another definition is 'sufficient but not ample.' However, when it comes to the facts, the wealthy pay what is, by any standard, a sufficient amount. According to the Washington Examiner:
'As matters stand, the top 1 percent of
American households paid 39 percent of income taxes in 2009, according
to the most recent data compiled by the Congressional Budget Office, and
the top 5 percent of taxpayers paid 64 percent.
But income taxes, taken in isolation, do not
tell the whole story, because lower-income Americans do pay payroll
taxes. But even taking into account all forms of taxation, the top 1
percent still paid 22 percent of federal taxes while earning just 13.4
percent of household income. The top 5 percent paid 40 percent of all
federal taxes, despite earning only 26 percent of all income. No matter
how you slice the numbers, it's hard to understand why anyone would
think the wealthy aren't already shouldering a burden commensurate with
their blessings.'
This leads to a basic question: how is a system in which those who earn 13.4% of the income yet pay 22% of all taxes possibly fair, by any definition of the word? If we want to be truly fair, by the definition of the word, the governement would confiscate the income of every individual and spread distribute equally. Yet no one is proposing this solution.
As I see it, there are only two truly fair options. The first would be to implement a national tax rate that is the same regardless of income (a flat-tax). Everyone who receives a paycheck would pay, let's say, something along the lines of 14%. If you make $30,000 per year, $4,200 of it would go to the government. If you make $2.5 million, you'd owe $350,000 to the IRS on April 15th. Just as a mother, when dividing up dessert between her three kids, is almost certain to divide it into three equal parts - she doesn't consider who ate the most for breakfast or who wants more. In order to be fair, she makes things even.
The other fair taxation plan would be something akin to what is virtually universal in Europe, the Value Added Tax (VAT, basically a national sales tax). With a VAT, people pay taxes on what they spend, not on what they earn. Some argue that this system should replace the entire US tax system. In this way, the wealthy really will - assuming they spend like wealthy people - pay a higher percentage of the taxes. And like the system already mentioned, it's fair in the truest sense of the word in that it's even; the VAT doesn't effect different people based on their income level, just on their spending level.
When discussing an issue as contentious as this it's important to keep something in mind: on most topics (and this is one), there are facts and there are opinions. It is a fact that the government should try to get as much revenue as is reasonable via taxes (although it is an opinion about what 'reasonable' means). It is also a fact that in most cases, increases in taxes lead to a decrease in revenue. This is something Chris Christie has pointed out: New Jersey at one point 19 consecutive tax increases and 19 times, tax revenues decreased. When they lowered taxes, revenues increased. Again, this is a fact, not an opinion. The same is currently happening in Spain, where the government this year increased VAT and projected a revenue increase of 4.3%. Revenue actually decreased by 3.5%. Even under the administration of John. F. Kennedy, Secretary of the Treasury C. Douglas Dillon reduced taxes to increase tax revenue.
Therefore, the fact-based conclusion we can draw is that when a government is in financial crisis and needs as much revenue as possible, taxes should be lowered on all. Lower taxes equal higher revenue, which leads to a quicker end to any financial crisis.
One final note: I read constantly when individuals such as Warren Buffet clamor for a higher tax rate on themselves, who feel that they should pay more to the IRS. I'd like to remind these people that the tax rate they're in is the lowest amount required by the federal government. They are more than welcome to pay more - their checks won't be returned. As Gandhi once said, 'You must be the change you wish to see in the world.'
