The Emporia (KS) Gazette: The “Class Warfare” Nonsense
media mentionOctober 7, 2011
by Bob Grover
When President Obama released his most recent plan to create jobs and address the national deficit, he proposed that wealthy Americans and corporations should pay higher taxes. Congressional leaders John Boehner, Mitch McConnell, and Paul Ryan responded with cries of “class warfare.”
Boehner and company must be desperate for a reason to explain why raising revenue from wealthy Americans and corporations is unfair. They are ignoring troubling economic trends that indicate growing income inequality. Former President Bill Clinton recently pointed out that 90 percent of income gains in the last ten years went to the top 10 percent of U.S. earners, and 40 percent of the increased wealth went to the top one percent. The middle class has actually lost ground in the same period. The only growth in this economy is the increasing number of families that have fallen below the poverty line. The Census Bureau recently released data indicating that almost 50 million Americans (nearly 1/6 of our population) are now in poverty.
Jim Wallace, writing for Sojourners, stated the issue very well: “So why is it when the top 1 percent of the country controls 42 percent of the nation’s financial wealth — more than 90 percent of the rest of us — and the ratio of CEO pay to average workers salaries is 400 to 1, it is NOT class warfare? Yet simply calling for a return of the highest-end tax rates to the 1990s levels IS?”
These same leaders who don’t want to raise taxes on the wealthy and on corporations counter with the erroneous claim that half of Americans pay NO taxes. They point to a recent finding by Congress’ Joint Committee on Taxation that reported 51 percent of households owed no federal income tax in 2009; however, 2009, as you’ll recall, was the year after the collapse of the stock market in fall 2008. The recession increased the number of Americans with low incomes, and the 2009 Recovery Act provided a tax credit for the first $2,400 in unemployment benefits, removing millions of Americans from the federal income tax rolls.
It also is important to identify the people are who don’t owe federal income tax in a given year. Some 70 percent of people who owe no federal income tax are low-income working households who simply don’t have enough income to pay taxes; however, these people do pay payroll taxes, federal excise taxes, and state and local taxes.
According to the Tax Policy Center, 35 percent to 40 percent of households owe no federal income tax in a more typical year. For example, in 2007 the figure was 37.9 percent. If we include payroll taxes, which fund Social Security, Medicare, and unemployment compensation, the number paying no federal taxes is much less; data from the Urban Institute-Brookings Tax Policy Center show only about 14 percent of households paid neither federal income tax nor payroll tax in 2009, despite the high unemployment and temporary tax cuts that year. This percentage would be even lower if federal taxes on gasoline and other items were taken into account.
Most of the people who pay neither federal income tax nor payroll taxes are low-income people who are elderly, unable to work due to a serious disability, or students. Moreover, low-income households as a whole do, in fact, pay federal taxes. Congressional Budget Office data show that the poorest fifth of households as a group paid an average of 4 percent of their incomes in federal taxes in 2007. This was not an insignificant amount, given the low incomes of these households; the poorest fifth of households had an average income of $18,400 in 2007. The next lowest fifth, with incomes between $20,500 and $34,300 in 2007, paid an average of 10 percent of their incomes in federal taxes. Even these figures understate low-income households’ total tax burden, because these households also pay substantial state and local taxes. Data from the Institute on Taxation and Economic Policy show that the poorest fifth of households paid 12.3 percent of their incomes in state and local taxes in 2010.
While the tax code needs revision to remove some of the deductions and to spread the responsibility for taxes through the various levels of income, the argument that the poor are not paying their share is false.
Neither is there credibility in the cry that raising taxes on the wealthy is class warfare. There’s a more appropriate term that applies, and we don’t hear it much these days: “greed.”