It’s supposedly a way to “level the playing field,” but as any fan knows, it doesn’t work perfectly. Some teams seem to be good season after season, while others usually struggle. In the NFL, for example, the Pittsburgh Steelers have captured six Super Bowls, while the Detroit Lions have never been to one.
Billionaire owners can afford to run their leagues however they wish. But in the real world it makes little sense to punish success or reward failure. Yet that’s exactly what the federal government’s tax policy does.
According to a recent report by the non-partisan Congressional Budget Office, in 2007 (the most recent year for which figures are available) the top 20 percent of earners paid 70 percent of all federal taxes. The bottom 40 percent of earners paid no income tax.
In fact, the CBO reports that during the Bush presidency the tax burden for the bottom 80 percent of taxpayers plunged, even as their income grew. For those in the bottom 20 percent, for example, income increased 4.6 percent, while the tax share paid dropped by 27 percent. The same held true for the next four quintiles—they earned more, yet paid a smaller percentage of taxes.
It’s only the highest earners (the top 20 percent) who saw their share of the tax burden increase. It jumped by 3.4 percent, while they enjoyed a 12 percent increase in their income.
Lawmakers aren’t just talking about taxing the rich; they’re doing it. And political rhetoric, aside, the already disproportionate burden on the highest earners has been growing. Except for “the rich,” Americans tend to be getting more for less.
This matters, because paying taxes should be a civic duty. It gives Americans a stake in our country, and gives us a reason to keep a skeptical eye on Washington. It seems only fair that, while the wealthy will always pay more, everyone should pay something. Everyone, after all, benefits from our unparalleled military might, and we all ought to contribute something, no matter how small an amount, to keep it strong.
Yet the Tax Policy Center reports that 47 percent of households owed no income tax in 2009. In fact, many actually make money through the Earned Income Tax Credit.
It’s time to heed an age-old warning. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy.
It’s unclear who first spoke these wise words. Some attribute them to French-born writer Alexis de Tocqueville. Others cite British writer Alexander Fraser Tytler. Or it may have been an unheralded op-ed writer in the Midwest. The origin doesn’t matter. It’s the insight that counts. When people can vote themselves something for nothing, they will, and they’ll keep squeezing the rich until they have nothing left to give.
Governments have always used higher tax rates to discourage certain behaviors. A recent example is tobacco taxes, which often double or triple the price of a package of cigarettes. Lawmakers don’t want people to smoke, but they don’t want to ban smoking outright. Instead they just keep dialing up the taxes, and fewer people light up.
But the government doesn’t want to discourage economic success. Politicians on both sides of the aisle speak every day about creating jobs and growing our economy. So why do they also implement policies that punish success by over-taxing “the rich”?
We’d better figure that out—and stop it—before we kill the goose that lays the golden eggs.