Wealthy Americans Already Pay Their Share

Arguments to the contrary spurn or wildly distort statistics and cherry-pick anecdotal examples

By Phil Gramm and John F. Early. Excerpts:

"The claim that rich Americans pay a smaller share of their income in taxes than any other households is verifiably false. The nearby graph shows that taxes actually paid, as a percentage of income earned and received in transfer payments, rise steadily from 5.1% in the bottom quintile of households to 39.6% in the top 1%. While it’s too small to show on the graph, the top 0.1% of earners, which included 127,586 households in 2017, had an average gross income of $2,892,434 and paid $1,304,769, or 45.1%, in federal, state and local taxes.

To be sure, the average household in the top 1% retains almost 18 times as much income after taxes and transfer payments as the average bottom-quintile household. But it pays more than 219 times as much in taxes. Even at the very top of the income distribution, the average household in the top 0.1% has more than 31 times as much income as the average bottom-quintile household, but pays almost 482 times as much in total taxes.

Data from the Organization for Economic Cooperation and Development show that the U.S. has the most progressive income tax system in the world, with the top 10% of earners paying 45% of all income taxes, including Social Security and Medicare taxes, compared with only 28% in France and 27% in Sweden. If the U.S. government spent as large a share of gross domestic product and had the same tax structure as France, the top 10% of U.S. earners would pay about what they pay now in income taxes, but the bottom 90% would see their taxes almost double. Although the last OECD tax comparison was made in 2015, before the Tax Cuts and Jobs Act of 2017, the Joint Committee on Taxation has shown that the U.S. tax system, in terms of proportionate tax burden, became more progressive after the 2017 tax cut than it was in 2015."

"Warren Buffett has donated billions to charity. And though he may be worth hundreds of millions of dollars a year to Berkshire Hathaway, he pays himself only a nominal salary. Because he rarely sells assets and makes considerable charitable donations, Mr. Buffett might, as he often says, actually pay a lower effective tax rate than his secretary.

The Buffett case illustrates the left’s argument that the megarich avoid taxes by simply avoiding income. Fair-minded people can debate whether a chronic wealth accumulator like Mr. Buffett, who spends so little of his wealth, is paying his fair share. But there’s a strong case to be made that he’s a public benefactor."

"Mr. Buffett simply accumulates and does not consume, his wealth is creating jobs and promoting the general prosperity rather than benefiting him personally."