Debate Club

Tax Rates Are Fair; Deductions, Loopholes, and Exemptions Are Not

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I'm going to assume for a minute that we all agree what constitutes "rich" because that's half the battle. Of course, that still doesn't make the question easy because what's fair is also relative.

From a numbers perspective, the top wage earners are paying more, as a share of taxes collected, than the rest of the country. The top 5 percent of taxpayers paid more in federal income taxes in 2008, the most recent tax year for which full data is available, than the remaining 95 percent put together. And while the same 5 percent did earn a lion's share of the wealth (31.7 percent of the nation's adjusted gross income), they still paid proportionately more (58.7 percent of federal individual income taxes) in terms of dollars. In fact, taxpayers making between $200,000 and $109,735,999 pay more—by percentage of adjusted gross income—than every other tax bracket. And the "barely" millionaires (those making between $1 million and $10 million) pay the most—nearly three times the marginal tax rate of the middle class (roughly those making between $50,000 and $100,000).

[Read the U.S. News debate on the flat tax.]

Conversely, those at the bottom are paying less. For the same tax year, 2008, nearly half of all those that filed tax returns paid no tax or received every dollar back which was withheld. From 2000 to 2008, the number of non-payers increased by 59 percent even though the number of filers has only increased by 10 percent.

So the statistics tend to support the argument that the rich are, in fact, paying their fair share in taxes. But what about Warren Buffett? What about those ridiculously low tax rates for the super rich? Is that all a myth?

[Read 10 things you didn't know about the Bush tax cuts.]

Not quite. Those at the very top (the so-called 1 percent), like Buffett, may pay less, as a percentage of income, than many taxpayers by simply taking advantage of existing tax breaks. We get so caught up in tax rates and tax brackets that we aren't focusing on what's really creating the inequity: exemptions, deductions, and loopholes. Realistically, if we keep the focus on tax rates, we'll continue to argue about whether the rich are paying their fair share. If, however, we broaden our discussions about tax reform to include a combination of eliminating tax preference items and widening existing tax bases, maybe we'll get close to a notion of fairness that we can agree on.

Kelly Phillips Erb

About Kelly Phillips Erb Author of Taxgirl Blog

federal taxes

Other Arguments

351 Pts
Claim That Rich Don't Pay Enough Based on Perception, Not Fact

Yes – Claim That Rich Don't Pay Enough Based on Perception, Not Fact

Jason Fichtner Senior Research Fellow at George Mason University's Mercatus Center

6 Pts
Soaking the Rich Won't Grow the Economy

Yes – Soaking the Rich Won't Grow the Economy

Alan Reynolds Senior Fellow at the Cato Institute

-109 Pts
Blame Budget Shortfall on Tax Cuts for the Rich

No – Blame Budget Shortfall on Tax Cuts for the Rich

Tamara Draut Author of 'Strapped: Why America's 20- and 30-Somethings Can't Get Ahead'

-122 Pts
Tax Code Skewed in the Rich's Favor

No – Tax Code Skewed in the Rich's Favor

Dan Berger Member of Patriotic Millionaires for Fiscal Strength.

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