In a recent interview with Yahoo Finance, Vice President Joe Biden said the following:
“the top 1 percent of earners get 22 percent of all income made in the U.S. Taxes have been lowered for the wealthy considerably over the years. It’s about time we get a little tax equity here.”
Putting aside the fact that the Vice President thinks top-earners “get” their income instead of earning it through hard work, innovation and business acumen, he is right that the top one percent of taxpayers earn 22 percent of all income. But what he fails to mention is that they also pay more than 40 percent of all income taxes. By most people’s standards that is more than enough “equity”.
In fact, the top one percent of taxpayers pay more taxes than the bottom 95 percent of taxpayers combined. And the bottom 50 percent of taxpayers pay less than 3 percent of all taxes. If current trends continue, the bottom 50 percent will soon pay no income taxes at all.
This is a dangerous situation because that means a majority of taxpayers, and therefore voters, will be able to vote themselves a larger and larger share of government benefits at no cost to themselves. All government spending will be financed entirely by a shrinking minority of taxpayers. Politicians will have no incentive to say no to more government spending since there are more votes to be won from increasing spending.
According to Vice President Biden’s conception of fairness this isn’t a bad thing. In fact, he thinks top-earners should pay more and lower-earning taxpayers should pay less. But if he gets his way, we will quickly pass the threshold where more than half of all taxpayers pay no income taxes. If that were to occur, never-ending increases in government spending would be the result. And more and more taxpayers that pay nothing will inevitably lead to fiscal implosion when there are no longer enough productive taxpayers to fund all the government spending.
Fairness is ultimately in the eye of the beholder, but consider the share of taxes the top one percent would pay under a more proportional tax system than our current highly progressive tax code. Under a flat tax, for example, if they earned 22 percent of all the income, they would pay 22 percent of all taxes.
That seems more equitable than the system Vice President Biden desires that would only lead us into fiscal Armageddon.
