This morning, Jim Cramer of CNBC was speaking critically of Herman Cain’s 9-9-9 plan on the basis that a sales tax is regressive. I oppose 9-9-9 for a very different reason, as I explained here, and have a very different reaction to the idea of a less progressive tax code, as I communicated to Cramer in this note:
I oppose 9-9-9 because I don’t want to give the federal government a national sales tax unless the 16th Amendment were repealed.
However, in response to your more fundamental criticism that 9-9-9 or a sales tax more generally would be regressive, I think it’s time for a little more regressiveness in the tax code.
The Buffett thing is a straw man, as even the AP pointed out.
In the meantime, the top one percent of taxpayers pays almost 40 percent of income taxes (while earning about 21% of national income) and more than a third of those who actually file a tax return have zero tax liability.
How about this: “In 2008, this top 0.1 percent filed 140,000 tax returns, reporting nearly 10 percent of all adjusted gross income earned and paying approximately 18.5 percent of the nation’s federal individual income taxes.” (Source)
Of course you’ve heard that the top 1 percent pay more than the bottom 95%.
The Bush tax cuts made our federal income tax system more “progressive” than ever, meaning that fewer people than ever (in percentage terms, in modern America) have any financial stake in the behavior of our government. For 2009, it was estimated that 47 percent of Americans paid no federal income tax.
This means that you have about half of the population who have zero incentive to vote for anything other than the big spending that is bankrupting our nation, since they think they’ll never have to pay the bill. This doesn’t hold perfectly, of course, because many Americans do hope and expect to have their incomes increase over time and history has shown substantial income mobility in the U.S. Nevertheless, when you have about half the country looking to vote themselves the wealth of the other half, you have a serious problem.
In my view, nobody other than the poorest Americans should be able to pay zero income tax, and I say that fully understanding that most low wage earners pay the payroll tax which is not a small number. However the payroll tax pays (theoretically, at least) into Social Security and Medicare, not to support the other functions of government. I want every American to feel that they have a stake in good government, and therefore if I were in charge, I would insist that any family above the poverty line pay something in income tax. And of course I would start chipping away at the EITC and other such transfers of wealth. In short, we are not a socialist country and shouldn’t behave like one.
It’s fine to care about the less fortunate, but it’s time for more people to realize that stated good intentions usually lead to failed or disastrous outcomes, whether we’re talking about Cuba or Venezuela or the USSR…or the Obama administration.
So to the extent that you say a tax is regressive, that tends to make me support it…and I’m not in the top 1% of earners (though I have been in the past and hope to be again.)