The Middle Class Pays Most for Government

An interesting analysis from Brian Wolf on Facebook. I quote:

(The problem with the statement) that "The rich pay the bulk of taxes" is that it simply isn't true. It's a lie.

The true statement is "most of the long-term capital gains, and hence a fairly large fraction of revenues generated by the Federal Income Tax, are paid by the wealthy".

There are two important aspects of the true statement. First, it applies only to the FIT (Federal Income Tax). The FIT is just a fraction of Federal income -- it is roughly the same size as payroll taxes (Social Security and Medicare), to which the wealthy make an insignificant contribution. Other Federal sources of revenue include the gasoline and other excise taxes and a whole suite of other taxes, almost all of which are also borne by the middle class.

And that doesn't include state and local taxes, which are a significant component of overall governmental revenue and which tend to be borne disproportionately by the middle class. Property, sales, gasoline, ... , taxes all are middle class taxes.

Wolf goes on to point out something about the word "income". If you own a lot of stocks and other property, and the value of what you own goes up year after year, unless you sell something and realize the profit, the increase in your wealth is not income. So an Internet entrepreneur can see the value of his ownership of a company go up by $20 billion and have no income.

Incidentally, the Republicans make the argument that we should not tax millionaires at a high rate because they create jobs with their wealth. We know however that a huge amount of money is sitting idle because those who own or control it don't want to invest. If we taxed the rich, at least some of that money could be put to work thereby creating some jobs; the people with those jobs would consume more, creating still more jobs; eventually with growing demand, people would again begin to invest in new productive capacity and the Great Recession would be over. Or at least, taxing millionaires now to put the money back in circulation would be a step in the right direction.