Income Taxes, Millionaires, and Billionaires

Senator Chuck Schumer (D-NY) is reported to be "irked" that President Obama didn't take his advice and use the tax bill to "corner Republicans into defending millionaires and billionaires."  In fact, Schumer's not just irked -- he's "deeply disappointed and convinced Obama had missed a major opportunity."  You'll remember that Schumer's plan was to continue the Bush tax cuts for everyone except those earning more than $1 million a year.

Presumably, Chuck is upset about income trends showing the income share of the very richest rising in recent years.  Here is data from the IRS showing that the top one percent of federal income tax filers are reporting a modestly bigger share of GDP since the 1980s.  But hey, Chuck: look at what the rich are paying in federal income taxes!  That's the red line on the chart below.

Back in 1986, the top one percent reported incomes of 6.4 percent of GDP on their tax returns.  By 2007, this share had risen to 14.3 percent of GDP.  But not to worry.  In 1986, just before the Reagan tax simplification and rate reduction, the richest one percent paid 25.7 percent of federal income taxes.  By 2007, after all the dreaded Bush tax cuts, they paid 40.4 percent of all federal incomes taxes.  But then came the meltdown of 2008.  The richest's share of income went down, despite all those greedy bankers.  And the richest one percent's share of the income tax went down too, to 38.0 percent.

The record for the last twenty years is that income tax rates for the rich went down and the income tax share paid by the rich went up, except during recessions.  So why should Sen. Schumer and our liberal friends be so determined to raise taxes on the rich?

We all know why.  It's the "inequality," stupid.  In the Reagan-Bush era, the rich got richer and the poor got poorer, and liberals like Chuck Schumer and President Obama are determined to change all that with new social programs like ObamaCare and higher taxes on the rich.  Here's why they are so concerned.  The chart, from the same IRS data, shows the income reported and tax paid by the bottom 50 percent of tax filers.

The solution is obvious.  Tax those greedy rich people!  But of course, the truth is not so simple.  Governments are already spending staggering amounts subsidizing the lower 50 percent. reports a trillion dollars a year in spending for government pensions, $1.1 trillion for government health care, a trillion for government education, and $0.8 trillion for government welfare.  If that hasn't done the trick, year after trillion-dollar year, what on earth will?

This nation is crying out for an approach to inequality more nuanced than the fundamentalist liberal approach of tax and spend.

The conservative line on inequality is that the trillions are part of the problem.  Take the recent report on marriage and children authored by W. Bradford Wilcox and Elizabeth Bradford, "When Marriage Disappears."  About eight percent of the babies born to highly educated mothers are born out of wedlock.  That compares to 54 percent babies born out of wedlock to the least educated mothers, and 44 percent of babies born out of wedlock to moderately educated mothers.  What is the difference between now and the good old days of the 1950s, apart from Fox News?  The difference is that government at all levels pays big money to help out single mothers.

Here's another factoid.  According to the Census Bureau's HINC-05 table on households for the Current Population Survey for 2008, the higher up the income scale you go, the more people in the household are likely to be working.  But over 50 percent of households in the poorest fifth are zero-earner households.

That's not the whole story.  Low-income households are more likely to he headed by someone over 65.  In the poorest fifth, 34.3 percent of households are headed by someone over 65.

What it is that our liberal friends really want with the rich?  President Obama has just agreed to extend their Bush tax rate of 35 percent, conceding the theory advanced by supply-siders that we need higher-income folks to use their money to grow the economy out of a recession.  Yet Sen. Bernie Sanders (I-VT) has been filibustering against a tax plan that is "bailing out the richest people in America."  No doubt he wants the money to be used for programs for people right now rather than for building a future of good jobs for all.

Where do we go from here?  We conservatives point to the straw of supply-side economics and boast that we can spin it into the gold of greater prosperity for all.  But who will find the Rumpelstiltskin to actually do the spinning and turn the theoretical straw into electoral and then legislative gold?

Christopher Chantrill is a frequent contributor to American Thinker.  See his and also  At he is blogging and writing An American Manifesto: Life After Liberalism.

If you experience technical problems, please write to