The Real Tax Gap
After listening to President Joe Biden or looking at polls of the general public, you might come away thinking that this weekend’s federal income tax filing deadline is a holiday for America’s wealthiest residents.
And, more to the point, you might be left with the impression that solving the country’s fiscal problems is as easy as raising their taxes.
Neither is true. In fact, the wealthiest Americans are now paying a higher share of federal taxes than at any time in the past 40 years.
Still, the persistent gap between what Americans (including the current occupant of the White House) believe about the federal tax code and the reality of who shoulders most of the burden is a problem. It muddies the debate over how to address chronic budget deficits and how to best manage the insolvency of Social Security and Medicare. More generally, it contributes to a phony sense of class warfare that boosts populist politicians of all stripes.
Biden, who was historically more of a centrist, has leaned harder into that message since becoming president. A common refrain in his speeches is a claim that American billionaires pay an average tax rate of just 8 percent—a claim The Washington Post‘s Glenn Kessler thoroughly debunked earlier this year. There’s also the more generic claims, like Biden’s promise in last month’s State of the Union address to “protect and strengthen Social Security and make the wealthy pay their fair share.”
Polls bear out a similar point of view. A recent Morning Consult/Bloomberg poll of voters in seven swing states found that 69 percent support raising taxes on Americans earning more than $400,000 annually—a rather arbitrary threshold, but one that Biden has used as a measuring stick to determine wealth. Meanwhile, a Pew Research Center poll conducted last year found that 82 percent of Americans are bothered “some” or “a lot” by the feeling that the wealthy are not paying their fair share in federal taxes.
Other surveys show that many Americans have a low level of tax literacy. A recent survey conducted by the Tax Foundation found that “most Americans are not just unhappy with the current tax code but also do not understand it.” One commonly misunderstood aspect is how much the wealthiest Americans pay in taxes every year. In the Tax Foundation survey, 78 percent of respondents did not know the share of taxes paid by the wealthiest 1 percent of Americans—but, tellingly, 65 percent of respondents said their own taxes were too high.
The most straightforward conclusion here is hardly a surprising one. Americans want someone else—preferably someone richer—to pay for the cost of government.
Here’s the good news: That’s already happening!
“The top 1 percent of earners, defined as those with incomes over $682,577, paid nearly 46 percent of all
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