Acton Institute Powerblog

Do the wealthy pay their fair share of taxes?

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fairshare-taxesDuring her presidential campaign, Sec. Hillary Clinton has repeatedly said she’d implement a tax system in which the wealthy “pay their fair share in taxes.” Expecting the rich to pay what is “fair” is not asking to much of them. But one question that is rarely considered is, “What if they already do pay their fair share?”

Before we can determine whether the rich pay enough we have to first ask what would be “fair.” How much of total tax revenues should, say, the top one percent of households pay? Five percent? 10 percent? 20 percent?

According to new IRS statistics from 2014 tax returns, the top one percent of households paid almost 40 percent of all income taxes collected by the federal government.

In 2014, 139,562,034 filed an income tax return, putting just under 1.4 million people into the category of “one percenters.” They earned 20.58 percent of all income and paid 39.48 percent of the taxes. The average adjusted gross income (AGI) for the group was $465,626 (the “poorest” people in the group had an AGI of $257,110).

This chart by the Wall Street Journal’s Richard Rubin highlights that the top 25 percent (avg. AGI: $77, 714) paid nearly 86.78 percent of all income taxes.

high-income-tax

As Rubin says, “So when we talk about the individual income tax, we’re mostly talking about how we tax high-income households, because that’s where the bulk of the income is and where the tax revenue is.”

It makes sense that high-income households would pay more in income taxes since, to paraphrase the bank robber Willie Sutton, “that’s where the money is.” Yet there is more to consider in assessing tax fairness than merely whether high-income earners are paying enough.

As Abraham Kuyper famously said, “there is not a square inch in the whole domain of human existence over which Christ, who is sovereign over all, does not cry: ‘Mine!’” This is important consideration for Christians to keep in mind when we think about money, especially when we think about how to “redistribute” the income of our neighbor. Their income—like our own—both comes from and is owned by God. How it should be spent is ultimately the Lord’s prerogative. We don’t have free reign to write a check to the IRS from our neighbor’s bank account.

This does not mean, of course, that we shouldn’t expect those who have been blessed financially to help share the burden of funding our government. What it does mean, though, is that when we think about at what level of funding we need to perform proper government functions we must not assume that merely because our neighbors have high earnings we are justified in taking from them whatever we want.

When we think about what constitutes a fair system of taxation we must not only ask whether the wealthy are paying their “fair share” but also whether our system is fair to those to whom God has given much.

 

 

Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

Comments

  • JethroXP

    Your comment about the AGI for the top 1 percent is incorrect. You are misinterpreting the information in the tables “Adjusted gross income floor on percentiles (current dollars)” and “Adjusted gross income floor on percentiles (constant dollars). Your description implies that the current dollars table is the average while the constant dollars table is the floor, which is incorrect. The AGI floor for the 1 percent (i.e. the “poorest” of the 1 percent as you phrased it) is actually $465,626 for 2014. The $257,110 number is the floor for that group in constant dollars, meaning it’s based on the Consumer Price Index to show the relative strength or buying power of a dollar from one year compared to a dollar in another year so as to account for inflation. To calculate the average AGI for the 1 percent you’d have to take the Adjusted gross income (millions of dollars) for the 1 percent minus the AGI for the 0.1 percent, and divide by the number of returns for the 1 percent minus the number of returns for the 0.1 percent, which gives an average AGI for the 1 percent of $805,469. You subtract out the 0.1 percent data from the 1 percent data because as you move right in the columns the numbers are cumulative, so the 1 percent numbers include the 0.1, which themselves include the 0.01, and so on.