In the wake of Osama bin Laden's killing, a significant tax story did not get much notice. The Wall Street Journal reported that the Joint Committee on Taxation found that "the percentage of U.S. households paying no federal income tax . . . reached 51 percent for 2009."
The paper also reported: "A 2008 study by the Organization for Economic Cooperation and Development, for example, found that the highest-earning 10 percent of the U.S. population paid the largest share among 24 countries examined, even after adjusting for their relatively higher incomes. 'Taxation is most progressively distributed in the United States,' the OECD study concluded."
Upper-income taxpayers' pretax income has grown more rapidly than that of other taxpayers. The Journal article cited the Congressional Budget Office in reporting that "average pretax incomes for the top 20 percent grew from $140,300 in 1979 to $264,700 in 2007, in inflation-adjusted dollars; for the top 10 percent, they grew from $182,800 in 1979 to $394,500 in 2007. . . . Incomes for all groups rose at least somewhat during the period, in inflation-adjusted dollars, albeit much more slowly for lower earners."
Contrary to liberal rhetoric, however, the Bush tax cuts have not impeded the trend toward greater progressivity. "A series of federal tax breaks for lower earners also has increased tax-system payouts and helped reduce tax shares for lower- and middle-income earners," the Journal said.
This is not an argument for making the tax system less progressive, but the data are a necessary corrective to the impression advanced by the Democrats that the rich don't pay their "fair share." They pay much more than that.
In his budget speech last month, President Obama asserted: "In the last decade, the average income of the bottom 90 percent of all working Americans actually declined. Meanwhile, the top 1 percent saw their income rise by an average of more than a quarter of a million dollars each. That's who needs to pay less taxes? They want to give people like me a $200,000 tax cut that's paid for by asking 33 seniors to each pay $6,000 more in health costs? That's not right."
But Republicans are merely declining to raise taxes — the same decision Obama made in the 2010 lame-duck session. And Republicans, such as those on the president's own debt commission, are seeking a flatter, simpler tax system with fewer deductions.
Democrats are perpetuating a fundamental untruth: If we tax only the rich more, we can keep entitlement programs just the way they are. But the math doesn't work that way. As Rep. Paul Ryan, R-Wis., explained, "It's mathematically impossible, if you agree with Obama's proposed spending, to not tax everybody."
There are legitimate arguments about how progressive our tax system should be, at what level of taxation we risk impeding economic growth, and which goals we want to promote through the tax code (e.g., family economic stability, homeownership, investment). But we should at least be clear on the facts and our starting point. We can't solve the debt problem by grabbing more money from the rich. And we simply don't have, as Obama asserts, a tax system that undertaxes the rich.