Speaking in Roanoke, Virginia, on July 13, President Barack
Obama famously uttered the
words that may come to define him and the 2012 presidential
campaign: “If you’ve got a business, you didn’t build that.
Somebody else made that happen.”
The truth is the opposite: It is government that is utterly
dependent on the private sector, in fact on a small
highly-productive subset of the private sector, for its ability to
do anything.
Obama says entrepreneurs should be fawningly grateful to
government (and implicitly to him) for teachers, roads, bridges,
and the Internet. But who paid for that teacher, that
infrastructure, and that scientific research?
The answer is not “taxpayers” and certainly not “all of us” but
rather “a very small percentage of Americans.”
The Congressional Budget Office (CBO) recently released a
study on income
and tax distribution for the years 2008 and 2009. The imbalance
between incomes earned and taxes paid is dramatic — in exactly the
opposite way from the claims of President Obama and his supporters.
The funding of our government embodies, as Mart Laar so
eloquently put it (in remarks I highly recommend you watch), the
“grand idea of Karl Marx.”
(“Income distribution” is itself a misleading term, implying
that the economy “distributes” a fixed amount of income, like your
mother deciding who at the table gets how big a slice of the cherry
pie. But wealth is created, not distributed, when people provide
goods or services that the purchasers value more than the money
they part with to receive them. Outside of monopoly or
near-monopoly situations, both parties to a transaction believe
themselves better off, which is why we do not get richer by making
other people poorer, but rather by making other people richer,
happier, healthier, and more productive.)
In 2009, the highest quintile (top 20 percent) of earners, with
household incomes over $223,500 before taxes, took in 51 percent of
the nation’s income but paid 68 percent of all individual
federal taxes. The middle quintile — the oppressed middle class,
earning between $64,300 and $93,800 — took in 14.7 percent of
America’s income but paid only 9.4 percent of federal taxes. And
the lowest 20 percent of earners, making less than $23,500, brought
home 5 percent of the nation’s income (much of which was transfer
payments from the rest of America) but paid only 0.3 percent of
federal taxes.
The effective federal tax rates for these groups were: 1 percent
for the lowest quintile, 11.1 percent for the middle quintile, and
23.2 percent for the highest quintile. Keep this in mind when
liberals tell you that data showing the rich pay a disproportionate
share of all taxes are skewed because they don’t include the fact
that lower income Americans pay Social Security and Medicare
(payroll) taxes; the CBO data do include those taxes, as well as
certain federal excise taxes such as on alcohol and tobacco.
(Excise taxes are the only category in which lower earners pay more
tax as a share of their income than higher earners because they
spend disproportionally more on beer and cigarettes.)
Even these numbers understate the penalty for success in
America. The top 1 percent, who earned 13.4 percent of the nation’s
income in 2009, paid 22.3 percent of all federal taxes and their
average tax rate was 28.9 percent.
By including Social Security and Medicare (payroll) taxes, which
— at least theoretically — return to those who pay them as health
benefits or cash repayments in the future, the CBO study plays down
the degree to which a small section of society is paying the
freight for the entire nation. For example, the top 1 percent of
earners paid nearly 37 percent of all federal
income taxes — down from over 40 percent just a couple of
years earlier because the recession hurt upper-earners
disproportionately. The top 10 percent of earners pay an
astonishing 70.5 percent of federal income taxes.
Looking only at income taxes, as this Tax Foundation
report does, other relevant facts jump out:
- While tax rates for the bottom 80 percent of taxpayers have
been dropping steadily for three decades, rates for the highest
quintile, and particularly the top one percent, have been little
changed. The tax code is more “progressive” than any time in our
nation’s recent history because so many Americans now pay no income
tax at all.
- The top quintile “now pays 94% of income taxes.”
- The share of national income earned by the top 1 percent has
dropped to roughly the average level found the 1990s.
Even with a CBO methodology which obscures the magnitude of the
penalty for success in America, the lessons from the study go
beyond debunking Obama’s repeated claim that “millionaires and
billionaires” don’t pay their “fair share.”
If all Americans benefit equally from having a strong national
defense (I defy the left to argue that the life of a rich person is
worth more than the life of a poor person), and with more than
two-thirds of federal spending going to the combination of transfer
payments (about 43 percent), defense (about 19 percent), and
interest on our debt (about 6 percent), one can argue that all —
more than all — federal discretionary spending such as on roads,
education, and scientific research is funded by the small slice of
American society whom Barack Obama and friends most demonize.
The tameness with which the “rich” react to the sucking of their
economic blood by the sanctimonious leeches of government is a
testament to the generous spirit of Americans, particular of the
Americans whom the left most aggressively attacks as selfish and
uncaring — as literally pushing granny off a cliff. At least
leeches have the good manners not to ask for thanks.
Rather than Barack “you didn’t build that” Obama and Elizabeth
“you didn’t get rich on your own” Warren griping
about the success of the successful and crediting themselves for
the accomplishments (and, in Warren’s case, the heritage) of
others, they should be offering sincere and profound thanks for
those Americans who do things that Obama and friends could never
do, who take risks that Warren and friends would never take.
If Obama wants entrepreneurs to thank government for what it
builds or creates, he should first thank successful businessmen and
women for paying for all of it.
The right response by businessmen to President Obama is not
simply “We built our businesses” but also “We built the bridges,
too.”
To put it another way: You can imagine that in the absence of
government involvement, there would still be schools with good
teachers (as there are in thousands of private schools today). You
can even envision that in the absence of government involvement the
private sector would create roads and bridges. But can you conceive
of the government doing anything — whether things it should or
should not be doing — in the absence of taxpayers? Who really
needs whom here?
Sorry, Mr. Obama, but it’s YOU who didn’t build that.
