During his attempt to calm the markets yesterday, President Obama once again signaled his belief that America needs higher, not lower taxes. Indeed, the Wall Street Journal is reporting that Obama’s remarks had “included a call for taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. changes that would boost payments from ‘wealthy Americans and corporations,’ but this phrase was taken out at the last minute. None the less, Mr. Obama seems obsessed with the notion that wealthy Americans and corporations are not paying enough taxes.
The President’s notions are not, however, grounded in fact. Let’s review the data on individual taxpayers first:
- Recently released IRS data for 2009, shows that taxpayers earning over $200,000 paid 50 percent of the $866 billion in total income taxes paid that year, or $434 billion. Skeptics will say, “That’s because they earn the majority of the income in America. Not so. These taxpayers earned 25 percent of the $7.6 trillion in total adjusted gross incomeFor individuals, gross income is the total pre-tax earnings from wages, tips, investments, interest, and other forms of income and is also referred to as “gross pay.” For businesses, gross income is total revenue minus cost of goods sold and is also known as “gross profit” or “gross margin.” in the country that year.
- The 2009 IRS data also shows that a record 58.6 million tax filers had no income tax liability that year. This means that 42 percent of the 140 million Americans who filed tax returns that year contributed nothing to the basic cost of government.
- Millions of people received cash “refunds” in 2009 even though they paid no income taxes: Some 21 million nonpayers received $27.5 billion in refundable credits from the child credit; Obama’s Making Work Pay program gave out $12.8 billion in refundable credits to 32 million filers; The Earned Income Tax CreditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. program doled out $54 billion in refundable credits to 24.9 million filers; and, nearly 5 million filers received $3.9 billion in refundable Education Credits and roughly 1 million filers got $4.65 billion in refundable credits under the First Time Homebuyers credit program.
The data also shows that the corporate tax burden is extremely progressive as well.
- In 2008, the roughly 1,900 largest corporations paid $152 billion in income taxes. This amounted to 67 percent of the $227 billion in total corporate income taxes paid that year.
Obama repeated statements that the wealthy and corporations are not paying their fair share of taxes are simply false. The facts show that the very taxpayers Obama wants to raise taxes on are already paying more than their fair share of taxes and that the majority of Americans are getting the benefits of government spending while contributing next to nothing to its basic cost. That is a recipe for fiscal and social instability.
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