Even After Taxes, The Rich Fund Their 'Fair Share' of Progress
The ultra-rich overpay for luxuries before they become ordinary and affordable: their consumption fuels our collective future.
One of my recent articles was published in the American Institute for Economic Research’s “The Daily Economy” blog on November 1. I co-authored this piece with Dr. Timothy G. Nash after we agreed that more people need to understand how disingenuous and misleading the claims that “the rich don’t pay their fair share” are.
Our piece was also highlighted by George Leef on the National Review website. Leef wrote,
This staple of leftist rhetoric is getting a workout in the campaign, as Harris says that if elected, she will push for tax changes that will, at long last, make the rich pay their fair share.
And here is a well-crafted rebuttal from Timothy Nash and Jason Hayes on the American Institute for Economic Research’s Daily Economy today.
They point out that the tax figures show beyond question that the wealthy already pay a very high percentage of the federal government’s tax take. The Democrats know that’s true, but they won’t admit it because they rely on envious voters not paying any attention to those numbers. They want to pose as champions of the “little guy” even though they aren’t.
Leef winds his piece up with a great question (and answer). This question is exactly what Tim and I were aiming for when we wrote the article.
Would we today have air-conditioning and many other modern conveniences if in the past, the government had taxed the wealthy far more than it did — at levels the “progressives” now demand? No.
Here’s the opening portion of the piece. The full article is available to the public on AIERs, The Daily Economy.
“It’s about paying their fair share,” explained Vice President Kamala Harris in a September 25 interview with MSNBC. “I am not mad at anybody for achieving success, but everyone should pay their fair share.”
“Pay their fair share” is a practiced mantra in Washington, DC. Politicians, from Vice President Harris to President Biden, Senator Bernie Sanders (I-Vermont), Rep. Alexandria Ocasio-Cortez (D-New York), and Senator Elizabeth Warren (D-Massachusetts), routinely claim that the rich are not doing their part and must pay their fair share.
A quick look at the numbers shows politicians are posturing against an imaginary enemy. The rich pay their fair share and far more by any objective standard. They are often un-thanked providers of a great wealth transfer to America’s middle- and lower-income classes using their purchasing power to raise living standards for everyone.
Kamala Harris’ proposed tax plan would increase taxes on corporations and the “ultra-rich” to achieve “equitable outcomes.” She plans to increase the capital gains tax rate from 20 percent to 28 percent, the top income tax rate from 37 percent to 39.6 percent, the investment income tax from 3.8 percent to 5 percent, and the corporate tax rate from 15 percent to 28 percent. She also plans to add an unrealized capital gains tax, moving it from 0 to 25 percent.
Harris also intends to allow the Trump tax cuts to expire in 2025. But, the average tax rate paid by every category of taxpayer was lower last year compared to before the Trump 2017 Tax Cuts and Jobs Act. Allowing the tax cut to expire will increase the tax burden for most American workers and businesses. Like Trump’s, Harris’s plan lacks significant government spending cuts to reduce our rapidly growing national debt.
Kevin Munoz, a senior spokesperson for the Harris campaign, claims the plan will not add to the national debt. Munoz argues increased costs would be covered by making corporations and the ultra-rich pay their “fair share” via higher income tax rates.
The most recent individual federal income tax information from the IRS indicates, in 2024, American taxpayers paid $2.43 trillion to the federal government, a 43 percent increase in revenues over 2020.
That data also show the top one percent of taxpayers earned 26.3 percent of Adjusted Gross Income (AGI) but paid 45.8 percent of all personal federal income taxes. The top 0.1 percent of earners paid 24.7 percent and the top 5 percent paid 65.6 percent.
In contrast, the bottom 50 percent of taxpayers earned 10.4 percent of income but paid only 2.3 percent of the total tax burden. Over the past forty years, the rate paid by the bottom 50 percent has declined from just over 7 percent to just over 2 percent, while the percentage paid by the top 1 percent increased from just over 17 percent to nearly 46 percent of all individual taxes.
In 2021, the top one percent of taxpayers reported an average tax rate of 25.9 percent, while the bottom 90 percent averaged tax rates between 3.3 percent and 10.4 percent.
By any definition of “fair,” the rich pay their share, and their habit of investing in new technologies further expands that impact.
“Every innovation makes its appearance as a ‘luxury’ of the few well-to-do,” explained economist Ludwig von Mises. “After industry has become aware of it, the luxury then becomes a ‘necessity’ for all.” Historically, the rich pay high prices for early, lower-quality versions of new products. Once economies of scale and scope set in, products become widely available, and all customers can purchase them at much lower prices and higher quality because the rich first invested in them. By this mechanism, “capitalism has its own built-in welfare transfer system from the rich to the poor,” explains Southern Methodist University economics professor Dr. Michael Cox.
Since 1900, the average American’s life has improved dramatically due to various products for which the rich were willing to pay a far higher initial price.
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From this point in the article, Tim and I discussed how investments by the ultra-rich have allowed the rest of us to enjoy, now widely available, technologies like home electricity, air conditioning, automobiles, and cell phones.
Given word limits, we had to stop there, but a host of other examples come easily to mind: air travel, medicines and other medical treatments (lasik anyone?), computing technologies, and even the internet could not be what it is today—ubiquitous—without the investment of massive amounts of private capital.
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Agree 100%