If you’re like most Americans, you probably imagined that the tax return you file with the Internal Revenue Service (IRS) each year is private and secure.
Moreover, that if some nefarious employee, cybercriminal or rogue nation hacked the IRS and stole it, no reputable news outlet would publish that information.
But thanks to the actions this month of ProPublica – a group that calls itself “a nonprofit newsroom that investigates abuses of power” – we now know that’s not true.
It’s another example of the War on Wealth being waged by academia and the mainstream media.
According to the eggheads and scaremongers, there are only a few ways that Americans get rich.
They steal money. They inherit it. They cheat people. They buy a congressman. Or they get lucky.
(That’s why you hear folks with a high income or net worth described as “the fortunate.”)
For some, the adjective “wealthy” itself is a slur.
According to this view, if you’ve worked, saved, invested and compounded for decades, you’re not only selfish and greedy… You’ve deprived more deserving souls of that money.
Ergo, the wealthiest are not the folks who have provided the most people with what they want or need. They are the biggest sinners.
ProPublica wants to make sure everyone understands that. Even if they have to be underhanded to argue it.
The organization took IRS data they knew to be stolen, sorted out the nation’s wealthiest individuals, divided their income taxes paid by Forbes magazine’s estimates of their net worth, and declared that their “true tax rate” – ProPublica’s own made-up phrase – is miniscule.
This is a tempest in a thimble…
No one pays income taxes each year based on the unrealized gains on their real estate, business or investment portfolio.
And that’s a good thing.
Private businesses, farms, art collections and many other assets are neither liquid nor easy to value.
The vast majority of countries that have had wealth taxes have already gotten rid of them.
They quickly learned that wealth taxes are difficult to determine, hard to collect, don’t raise much money and incentivize high-net-worth individuals (and their precious capital) to leave the country.
Moreover, the Takings Clause of the Fifth Amendment to the U.S. Constitution states plainly that private property shall not be taken for public use without just compensation.
In short, ProPublica concocted a fable using stolen data to stoke envy and resentment against the nation’s highest-net-worth individuals.
The real story would have been a snoozefest.
The U.S. tax code allows deductions. ProPublica’s report provided no evidence that the ones used by the nation’s wealthiest were illegitimate.
(Think business expenses and charitable donations, not offshore bank accounts.)
No one in this country pays more income taxes when their homes or investment portfolios go up and they haven’t sold.
More to the point, no one calculates their “true tax rate” by dividing their annual income taxes by their net worth.
Yet ProPublica’s chief, Richard Tofel, called this news release “the most important story we have ever published.”
That says a lot, if not what he intended.
The real goal, of course, was to stoke outrage against wealth accumulation and provide cover for those in Congress pushing for confiscatory tax rates.
But do the rich pay their fair share?
That depends on whom we call rich and what we call fair. But everyone should be aware of the basic facts.
According to the National Taxpayers Union, the top 1% of income earners pay more than 40% of all income taxes, the top 5% pay over 60% and the top 10% pay more than 70%.
Some will insist that “the rich” should pay even more of the total. And we could have that argument.
But let’s be clear… The idea ProPublica is promoting – that the rich pay little or nothing in federal income taxes – is a myth.
The IRS reports that the very top earners pay an effective income tax rate of 32%.
Some look at billionaires and insist that no one can spend that much money.
But there is more you can do with a fortune – ethically and legally accumulated – than spend it.
You can help other people and organizations, give to worthy causes, and invest it for productive use.
Our capitalist system connects owners of wealth and people with good ideas.
That creates jobs, improves our standard of living and enriches us all. (It also generates many trillions in tax revenue.)
Academics and journalists don’t get this.
Or worse, they do, but still believe that large fortunes ought to be confiscated by the government for the “public good.”
There’s a reason this is unconstitutional.
Our free market system incentivizes working, saving and investing. And it has helped make us the richest nation in the world.
By the way, you might be surprised to learn – from a global perspective – just who is rich and how much is a fortune.
If you make $32,000 a year, you’re a global one-percenter.
And if you have $4,210 to your name, you are richer than half the world’s residents.
Let the confiscation and redistribution begin…
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