Earlier this year in his annual State of the Union Address, President Obama spent much of his speech discussing taxes. Specifically he talked greatly about the unfair tax system that favors the rich. If the president’s claims were to be believed, then you would think that the ultra wealthy pay almost no tax and that the country needs to significantly increase their tax bill. Taxing the wealthy has long been an argument from many as a means to improve our economy and help the lower class. The problem is, history has shown that taxing the wealthy more doesn’t help. It actually hurts.
The Wrong Message
However, despite what history tells us, many people still believe that the rich need to pay more and that the middle class is paying too much. Recent polls suggest that about 65 percent of America feels this way. While it might be true that the middle class pays too much of their income to the IRS, the fact is the top 1 percent already pay their fair share to the government. However, the media and democratic politicians would have the country believe otherwise. Again and again, American citizens are bombarded with the message that the rich don’t pay their fair share.
The Rich Pay Enough
A closer look at the real numbers, however, reveals that the ultra wealthy are already paying plenty. According to the IRS, the top 1 percent paid 35 percent of all the federal income tax collected in 2011, while they earned 19 percent of the total income. What’s more, the top 10 percent of earners in the country actually pay two-thirds of the total federal income tax bill, while the bottom 50 percent is only paying 3 percent of the total income tax. That sounds like the wealthy are already paying their fair share.
The Super Wealthy Pay Even More
While there are not a lot of people who fall into this category, the super wealthy are paying even more in taxes than the rest of the top 1 percent. In fact, the top 0.1 percent actually paid 16 percent of the country’s entire income tax bill, which collectively is more than five times greater than half of the nation’s population. When is enough, enough?
Raise Taxes on the Rich Hurts the Economy
Yet, left-leaning politicians and many in the media would still have you believe that the rich don’t pay enough. The problem is raising taxes actually hurts the economy. By taking more money from the rich through higher taxes, it also takes money away from small and medium-sized businesses and their owners. That hurts the economy more because it means there is less money for hiring more employees. The economy suffers and so do the middle and lower class families. The battle will rage on and both sides will continue to plead their case, but the numbers don’t lie, and history has shown that the rich already pay their fair share to the IRS. Taxing them more doesn’t work.
The post How Is That Federal Tax Code Treating the Uber Rich? first appeared on Advisors to the Ultra-Affluent – Groco.
