CNBC reported on a Congressional Budget Office finding that the top 40 percent of wage earners pay 106 percent of the income tax, while the lower 40 percent pay a “negative” nine percent of the income tax. In other words, they get more money back than they pay in.
You read that right. One group is paying more than 100 percent of individual income taxes, the other is paying less than zero.
How does someone pay negative taxes? The CBO’s formula offsets whatever taxes are paid with “refundable tax credits.” Some of these are due to “government transfers” of money back to the taxpayer in the form of social security and food stamps.
However, the greatest disparity in the report is the one mentioned above, regarding the share of individual income taxes paid by various income groups.
First, let’s look at incomes. The report shows the lowest-paid Americans earned on average $8,100 in 2010 but received nearly $25,000 in government aid. You begin to see how “transfers” create a negative tax burden.
But wait, there more. The CBO says about a quarter of the lowest earning group actually paid negative 15 percent of all individual income taxes. Contrast that with the combined share of the wealthiest two groups, which totals more than 100 percent.
All this talk about how the rich don’t pay their fair share is nonsense. They are carrying everyone.
Of course, they are also doing quite well despite their increasing share of the tax burden. One way to look at this statistic is that the rich are buying the cooperation of society. They are taking care of everyone.
From the standpoint of income taxes, no one can accuse the rich of not paying enough. However, maybe the amount we are taxed should not be how we measure fairness. If the rich are making money because they have access to the cheating of the Federal Reserve as it creates new money every month, then a large tax burden does not equalize the situation.
What we want is (1) an end to fiat currency and the Federal Reserve, (2) a minimal flat rate tax, and (3) an end to transfer programs.