A Fork In The Road…

August 7, 2012 — Leave a comment

Image

Two roads diverged in a wood, and I – I took the one less trav… Oh wait, both of these roads have been traveled plenty and I wonder what the difference has been.

President Barack Obama takes the road that says someone has to pay more taxes if the U.S. is to tame its budget deficit and provide the government he thinks the nation needs. He proposes that the best-off Americans pay more. It’s only fair, he says.

“There are a lot of wealthy, successful Americans who agree with me because they want to give something back,” he said in a speech in Roanoke, Va., that set off dueling campaign ads. “Look, if you’ve been successful, you didn’t get there on your own.”

His Republican opponent, Mitt Romney, counters that the deficit can be reduced without raising taxes if Washington is tough on spending. He thinks raising taxes on the best-off would be unwise and unfair. “President Obama attacks success, and therefore under President Obama we have less success,” he said.

These two contrasting comments, or roads, underscore philosophical differences over the roles of the individual and society. But the most tangible fork in the road is on taxing the rich.

“Who’s right: Obama or Romney? Both. Or neither,” says Joseph Thorndike, a tax historian. “When it comes to taxing the rich, there is no single, objectively correct answer.” “I’m struck” he adds, “how the facts can be used selectively by either side.”

Academic tomes have been written about revamping the tax code so it finances the government while doing less damage to economic growth. But, countless congressional hearings later, the U.S. is no closer to a consensus on “fair share” than when the income tax was born 100 years ago.

Over the past three decades, Americans—including most of the rich—have paid less of their incomes to Washington. Top earners have received more of the income and paid more of the taxes; a growing number at the bottom have paid less or, in some cases, nothing. Whether that is fair is a question of politics and values. Facts can inform the debate.

Here are a few salient ones:

  • The top 5%, top 1% and top 0.1% of Americans have been getting a bigger slice of all the income and paying a growing share of federal taxes.
  • Average tax rates have come down for everyone. On average, the tax bite on the rich is bigger—except for those whose income mainly comes from capital gains and dividends.
  • The share of taxes paid by the bottom 40% of the population has been shrinking along with their share of income.
  • The tax system narrows the gap between economic winners and losers, but not enough to stop the gap from widening.

Image

The question of “fairness” is not resolvable scientifically and it seems that the answer will not be found until we are further on down the road.  Let us hope that the path we choose is the correct one.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

 

No Comments

Be the first to start the conversation!

Add your $0.02

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s