Though many people are for raising taxes on wealthy people like Warren Buffett (pictured with President Obama), it probably wouldn’t do much. Image from Wikimedia Commons.
One of the most talked about issues lately has been the mounting national debt, and a popular sentiment on how to fix it is to begin taxing the rich at a higher rate. Unfortunately, levying greater taxes on the wealthy is not going to solve the nation’s problems.
Not enough wealthy to start taxing more
A constant refrain in the past few years of economic woe has been “tax the rich.” A majority of Americans support that idea, according to various polls. Politico.com says most polls reveal that 50 to 70 percent of respondents usually are in favor of raising taxes on the wealthy. A CNN poll found that 63 percent of poll subjects were in favor of higher taxes on the wealthy. The rich are thought to not be paying their fair share into national coffers. According to Politico, the effective tax rate on the nation’s 400 wealthiest families is 45 percent less today than it was in 1995. However, the number of people that fit the definition of “rich,” meaning income of $200,000 per year or more, are a mere 3 percent of the population.
Putting a finger in the dam
The wealthy make up a tiny part of the American populace. According to CNN, only 0.2 percent of tax returns were filed by people who made $1 million or more — 236,883 people. Only 8,274 people filed returns showing annual income of $10 million or more. It is estimated that raising taxes on the wealthy would not do much more than put a finger in the dam. According to the New York Times, raising the top marginal tax rate from the current 35 percent to 45 percent for couples earning more than $1 million per year and to 49 percent for billionaires would create another $78 billion in annual tax revenue. The deficit for this year, according to Reuters, is already at $1.1 trillion. The other hitch in the tax the rich strategy is that income for the wealthiest of Americans tends to fluctuate, according to CNN. Since many of the wealthier members of American society have large stock holdings, when stocks plummet, so does their income.
U.S. income disparity
Though taxing the rich would not fix economic woes like the growing budget deficit and the national debt, there is a wide income inequality between the wealthy and the rest of the nation. According to the Wall Street Journal, incomes for millionaires in Connecticut more than doubled between 2001 and 2008, compared to 21 percent for the rest of the population of that state. According to CNN, those making $200,000 or more per year made up 26 percent of all national income in 2009, and according to Remappingdebate.org, the bottom 90 percent of income earners in America hold only 29 percent of the nation’s wealth.