Earlier this month, I wrote a column entitled “Are the Rich Paying Their Fair Share?“
President Biden and other Democrats regularly claim that they’re not.
However, the IRS recently reported that the top 10% of income-earners pay more than three-quarters of all federal income taxes.
In fact, the percentage of total income taxes paid by the wealthiest has been rising for years.
Meanwhile, six out of 10 Americans pay nothing net of transfers.
I don’t think most of us realize this.
Or, if we do, it’s a bit surprising that a recent Pew poll showed that 61% of Americans favor raising tax rates for households that make over $400,000.
(Although, thanks to inflation, it now takes $488,000 to buy what $400,000 did when Joe Biden took office.)
What if the top 10% of income earners paid all the income taxes? Would that be fair?
Or would that make our democracy more like nine wolves and a sheep voting on what to have for dinner?
Of course, President Biden doesn’t just want to raise taxes on “the rich.” He also wants to raise the corporate income tax.
Pew shows that he has plenty of support on this issue too.
Its polls reveal that 65% of Americans say tax rates on large businesses and corporations should be raised.
Thirty-nine percent say they should be raised “a lot.”
Hmm. Here’s where the average American’s ignorance of the tax system works against them.
You see, a corporate entity is just a “pass through” legal structure.
That’s why investors often argue that corporate taxes represent double taxation.
First, the profits of the business are taxed. Then, the dividends and capital gains of the owners – the shareholders – are taxed again.
However, let’s leave that issue aside for now…
It’s often said that corporations don’t pay taxes. They merely collect them.
That’s because companies pass their costs onto customers. Higher taxes result in higher prices. Consumers pay those.
However, sometimes that’s not possible.
If customers balk at higher prices, the costs must be passed on elsewhere.
Studies show that 50% to 70% of a corporate tax increase not passed on to customers is borne by workers, who receive lower wages or benefits than they would otherwise.
The other 50% to 30% is borne by investors, who earn lower returns than they would otherwise.
That means that if you spend money, work and invest in stocks – as most Liberty Through Wealth readers do – you are hit by an increase in corporate taxes three times.
(And that’s before the double taxation of corporate profits.)
A recent Treasury study found that 92.6 million families – half of all U.S. households – pay more in corporate taxes than they do in individual taxes.
Yet these same folks shout “heck yeah!” every time some politician promises to raise corporate tax rates.
They don’t know that a corporate tax is a tax on everything you buy, everything you earn, and everything you invest in equities.
A corporation is a legal fiction designed to limit liability. And the corporate income tax is really a tax on the American people.
I can’t prove that most voters don’t understand this. But I have more than just a suspicion.
For example, Joe Biden has proposed a “billionaires’ tax” to save Social Security.
And the issue resonates with exactly the voters he needs.
Bloomberg reported this week that 77% of registered voters in seven swing states favor taxing the ultra-rich to make up for the coming shortfall in Social Security.
There’s only one problem… but it’s a significant one.
The Treasury estimates that the Social Security shortfall over the next 30 years will be $20 trillion.
Yet, according to Forbes, the total net worth of all 737 American billionaires combined is $5.5 trillion.
That means Uncle Sam could confiscate everything the nation’s billionaires own – the wolves at work again – and it wouldn’t come close to funding the gap in Social Security.
And Social Security is just one federal entitlement.
The current unfunded liabilities for Social Security, Medicare and Medicaid combined are more than $214.9 trillion.
For comparison purposes, that’s more than twice the GDP of the entire planet.
Yet Joe Biden wants voters to believe that endless government spending is not the problem.
The problem is that Americans – and their businesses, mutual funds, brokerage accounts and retirement accounts – aren’t taxed thoroughly enough.
The sad part? Tens of millions of voters agree with him.