The Shocking Truth About ‘Tax Fairness’

After spending decades peddling the fiction that the rich don’t pay their fair share of taxes, Democrats have convinced 60% of adults that it’s true, according to the latest I&I/TIPP poll.

That includes half of Republicans and nearly two-thirds of independents.

But just because most people believe something doesn’t make it true. And in this case, it is wildly and demonstrably false.

As our I&I/TIPP poll report today shows, the richest 1% of Americans now pay 45% of all federal income taxes collected, “the highest levels of taxes as a share of the total in history.” The bottom 75% of income earners, in stark contrast, account for only 11% of federal income taxes paid.

See: Surprised? Most Americans Think They Pay Too Much In Taxes, But The Rich Not Enough: I&I/TIPP Poll

Think about it this way: Four million people in this country — roughly the population of the city of Los Angeles — pay more than half of all federal income taxes.

On the other hand, 40 million — roughly the entire population of California — pay nothing in either income or payroll taxes, or they get a net tax refund from the federal government.

And, despite what you’ve heard ad nauseam about how Trump’s tax cuts were a “giveaway” to the rich, their share of the income tax burden has shot up since those pro-growth tax cuts went into effect (see that chart here).

So, no, the tax code doesn’t let the rich off the hook. Not by a long shot.

But it is unfair.

Why? Because it’s so horrifyingly complicated. 

The tax code is so complex and tangled that Americans spend nearly $300 billion just to figure out how much they owe the government.

The tax code is so bewildering that even low-income families have to hire experts to file their taxes, even though many of them owe nothing.

Worse, the complexity of the tax code makes it easy to cheat and hard to enforce. The IRS figures that more than $450 billion in taxes goes unpaid each year, and Democrats gave the IRS an additional $80 billion as part of the misnamed “Inflation Reduction Act” to try to collect some of that money. So you are not only paying more to make up for scofflaws, you’re paying more to enforce this ridiculous tax scheme.

There is nothing fair about any of that.

There are also the myriad tax breaks, credits, and other gimmicks designed to benefit politically favored groups and causes. As a result, two families that earn exactly the same amount of money can owe radically different amounts in taxes depending on their circumstances. How fair is that?

If you want a fair tax, the worst idea is to make the tax code even more complicated.

Instead, you would radically simplify the tax code. One idea is a flat income tax with no special tax breaks or gimmicks other than a generous standard deduction. Another is to kill the federal income tax system altogether and switch to a consumption-based tax. 

State governments understand this, which is why five switched to a flat tax in just the past few years, bringing the total up to 12. Nine other states have no income tax. These aren’t just reliably red states, either. Washington state doesn’t tax income, and neither does New Hampshire. Massachusetts has a flat income tax, as do Illinois, Colorado, Michigan, and Pennsylvania.

Under either a flat tax or a national sales tax, the rich would continue to pay far more in taxes than the rest of us, for the simple reason that they earn more and spend more than the rest of us. 

But everyone would be spared the soul-draining punishments meted out by the current Byzantine tax code. 

Now that’s what we call fair.

— Written by the I&I Editorial Board

Editor’s note: This is a revised and updated version of an editorial that first ran in these pages on April 15, 2019.