January 30, 2004

Taxes, of the Payroll and Income varieties

The always thoughtful Chris Rangel, MD reminds me that people like John Stossel like to point out that rich people pay more income taxes then poor people do.

This is, in itself, unproblematic. But, you know where this goes. Stossel and others of his ilk (Stossel is clearly an ilk, of the Brit Hume variety) quickly move on to claim that this is either a) unfair on its face, or b) evidence that any further attempts to increase the discrepancy in income taxes between the rich and poor is unfair.

Unsurprisingly, I reject both a) and b). Let's listen to Stossel:

Still you may feel the rich should pay even more. It's a tempting thought, since they have so much.

But let's remember the facts: the top 1 percent of Americans those who earn more than about $300,000 a year pay 34 percent, more than a third of all income taxes, and the top 5 percent, those making over $125,000, pay more than half.

Notice that John (can I call you John, Mr. Stossel?) only talks about income taxes. As if that's all the taxes there were. Just income tax.

Yes, John, let's "remember the facts." The fact is that John forgets about payroll taxes. These are, primarily, Social Security and Medicare, often collectively referred to as FICA after the legislation which established them. When politicians talk about tax cuts, they're always referring to the income tax or to other incidental taxes like estate taxes.

Payroll taxes have never been cut. Payroll taxes are the type of tax that most people pay more of than any other, including the income tax. Payroll taxes fall heaviest upon lower-income wage earners.

You might hear the argument (maybe even, if we're lucky, from John Stossel) that payroll taxes aren't like income taxes because they are returned to you in Social Security retirement benefits. Wrong! Remember Al Gore's lock box? He wanted to put Social Security funds in the lock box and throw away the key. Because now, of course, there is no lock box; it's more like a cookie jar, where the poor contribute the cookies and the rich eat them. Most people don't get back what they pay in to Social Security (and those who want to privatize Social Security try not to let us forget this).

George W. Bush, in his rush to cut those nasty income taxes that John Stossel complains about, depends upon the Social Security cookie jar to finance income tax cuts for the wealthy.

Taxes should be progressive. The rich, within reason, should pay more, for the simple reason that one less dollar in a poor person's pocket might affect how much he eats that day, whereas one less dollar in a rich person's pocket wouldn't be noticed. The rich shouldn't be raped, they should simply stop pretending they're solely responsible for their success. The stable society which taxes make possible enabled them to succeed, and they ought to give something back.

So please. John Stossel, (everyone, all together now)...


Posted by Carey at January 30, 2004 09:36 PM

I saw a John Stossel segment once where he proposed that America's poor aren't really so bad off because they can afford cable TV. Seriously.

Posted by: Mark Ashton at January 31, 2004 08:00 AM

I agree, Carey, and I saw the John Stossel report as well, Mark, about the poor having cable. Reminds me of when my mother (we were very poor) always purchased pop for her 7 kids when she got paid. This was a mistake as all our teeth rotted out and there was no money for dental care. However, she never could afford the larger and somewhat more important things, but she could afford a case of pop on payday. Were we "not so bad off" because we had soda twice a month? Hell, no!"

Posted by: Nancy at January 31, 2004 12:09 PM

Don't forget about taxes of the sales and property varieties as well. Those tend to hit the middle class (property taxes) and the poor (sales taxes) disproportionately severely as well. Last I looked, one of the arguments in favor of the progressive income tax is that it counterbalanced the regressivity of the sales, payroll and property taxes, and tended to more equitably shift the burden of taxation away from the poor and middle class.

Posted by: Len Cleavelin at February 4, 2004 01:07 PM