As A Percentage Of Income, You Pay More Taxes Than The Ultra-Rich, And It’s Getting Worse: Here’s Proof

It should be old news to almost everyone at this point. The rich are getting richer and the poor are getting, well… shafted. That’s not an argument from an envious standpoint, although I’ll admit, the value of my car does rise and fall on the volume of gas in the tank. It has to do with the fact that not only has the myth of equal access to opportunity been debunked a thousand times over, but that the one area in which we could level the playing field — taxation — is indisputably tilted in favor of the already-wealthy.

Even in countries with higher established taxation, such as the United Kingdom, we see it playing out. Taxes are high there ostensibly to pay for the general welfare of the country (think universal healthcare), but the poor’s share of that contribution has been steadily growing under more and more conservative leadership.

In the United States, the picture is even bleaker. Some have recognized it. Bernie Sanders said the words “millionaires and billionaires” during his campaign for President more times than any one person in history has in so short a span. He was attacking just what we examine here: Income inequality and the worsening of it through taxation.

According to a new paper by John Hatgioannides of the Cass business school, Marika Karanassou of Queen Mary University and Hector Sala of the Universitat Autònoma de Barcelona and IZA in Bonn, the past 40 years — that is to say, in the era immediately preceding and since the inception of “Reaganomics” — have been very kind to those at the very top of the income spectrum. This is the “top one-tenth of one percent” that Sanders so frequently referenced. This class has seen their incomes increase, as well as their share of total wealth, far faster than any other economic circle.

The Gini coefficient, a model used for more than a hundred years as a measure of income inequality, has been steadily rising since the decade before Reagan took office. At first it was a natural byproduct of new forms of investment and speculation in the oil and gas industry. But since the advent of “trickle-down economics,” these experts say, the measure for the US looks more like what you might see in developing nations. The most recent US Census Bureau study in 2010 showed the United States has the worst income inequality among all western industrialized nations.

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Some of that can be attributed to the amount Americans are required to spend on healthcare. Many of the nations faring better in the Gini index have some form of a universalized healthcare system, which vastly reduces the burden of both expected and unexpected debt. Going back to the UK, however, you can see that a not-for-profit health system won’t solve the problem outright. The authors of the paper sought to examine the income tax rates among particular segments of the population as compared to their share of national wealth.

An article by Larry Elliott, the economics editor at Britain’s Guardian newspaper, sums up the problem neatly:

In terms of income, the poorest 99% of the US population paid nine times as much income tax as the richest 1%, both when John F Kennedy was president in the early 1960s and when Ronald Reagan beat Jimmy Carter in the 1980 race for the White House. By 2014, they paid 21 times as much.

Similarly, the bottom 99.9% in the US paid 28 times as much tax as the elite 0.1% in the early 1960s and the early 1980s, but by 2014 they were paying 76 times as much.

The same trend applies – although it is not pronounced – when income tax is divided by the share of wealth. The bottom 99% paid 22 times as much income tax as the wealthiest 1% in 1980 but were paying 47 times as much in 2014. The bottom 99.9% paid 58 times as much income tax as the top 0.1% before the onset of Reaganomics; by 2014 they were paying 175 times as much.

In short, yes, the very rich do pay “more” in taxes, but they don’t feel it even remotely as dearly as you or I when the tax bill comes. This is the inevitable outcome derided by all but the most conservative economists when a politician proposes a “flat tax” rate: If you make $80,000 a year and paid 15% of it in taxes, that leaves you with $68,000 with which to pay your mortgage, credit card bills, car payments, grocery bills, tuition for your kids, and a host of other financial outlays. Add a zero to both of those figures, and you can see why the rich make out much better.

All of this is exacerbated by the fact that Donald Trump, being a billionaire himself, of course favors tax policy that favors billionaires. That means more failed trickle-down, more income inequality, and as the symbol of the entire system…

More tax cuts for the rich.


Featured image via Christopher Furlong/Getty Images