America: Who really pays the taxes? (revised edition)

In May 1994 John Hinderaker and I took a look at George (H.W.) Bush’s tax return in an article for National Review. The article addressed Bush’s 1991 tax return, which had been used with gross dishonesty by Pulitzer Prize-winning reporters Donald Barlett and James Steele in their book America: Who Really Pays the Taxes?. Unfortunately, in their 350-page book, Barlett and Steele never did get around to revealing who really pays the taxes. This despite the fact that the IRS releases the relevant data every year and no one such as Barlett and Steele devoting an entire book to the subject could possibly be unaware of the data.

At the time we wrote the Bush tax return article for National Review, the most recent data came from 1991 tax returns. The data indicated that the top 1 per cent of tax filers reported 13 per cent of total adjusted gross income (i.e., before most deductions), but paid 24.6 per cent of all federal income taxes. The top 5 per cent of taxpayers reported 26.8 per cent of the income, but paid 43.4 per cent of the taxes. The bottom 50 per cent of tax filers, by contrast, reported 15.1 per cent of the income, but paid only 5.5 per cent of the taxes, leaving 94.5 per cent of the tax bill to be paid by those with above-average incomes.

Since we wrote the Bush tax return article the trend of disproportionate tax payments by high income taxpayers has continued. Stephen Moore previews the most recent data in today’s Wall Street Journal: “My contacts at the Treasury Department tell me that for the first time in decades, and perhaps ever, the richest 1% of tax filers will have paid more than 40% of the income tax burden. The top 50% will account for 97% of all federal income taxes, while the bottom 50% will have paid just 3%.” Moore’s preview does not include the companion income data.

Given that poorer citizens always outnumber the rich, political philosophers have worried that government based on majority rule could lead to organized theft from the wealthy by the democratic masses. “If the majority distributes among itself the things of a minority, it is evident that it will destroy the city,” warned Aristotle.

The founders of the United States were deep students of politics and history, and they shared Aristotle’s worry. Up through their time, history had shown all known democracies to be “incompatible with personal security or the rights of property.” James Madison and others therefore made it the “first object of government” to protect personal property from unjust confiscation. Numerous provisions of the Constitution and the Bill of Rights were included to protect the property rights of citizens. We’ve fallen off from the spirit of the founders on this issue, but it would be good to recall it in connection with the release of the income tax data previewed in Moore’s column.

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