We ran across the enclosed item in Marilyn Vos Savant's column in Parade magazine and were astounded by her reply. Our first thought was, we should ask Cecil the same question. However, we're equally interested in your response to her answer. --Claire and Harold, San Rafael, California
Here's the question from Marilyn's column:
"Q: Is it true that the rich pay very little tax?
"A: No, and this is the myth, more than any other, that has created the unwarranted and destructive dissension among the so-called economic classes in this country. The wealthy pay a truly stunning amount of tax, and there are virtually no exceptions. Anyone who thinks otherwise has been misguided."
Regarding Marilyn's answer, I'll just say that when you make sweeping claims like this you might want to back them up with a little detail. She's not wrong though. As a general proposition, the wealthiest Americans do pay the bulk of the individual income taxes collected in the U.S. That's a point worth making, since the belief that the rich pay zip while the little guy gets slugged is the impetus behind the "flat tax" proposal, the stupidest idea to come down the pike since pet rocks.
Here are the numbers for 1992, the latest year available, from the Statistical Abstract of the United States:
The top 7 percent of those filing returns, those reporting adjusted gross income of $75,000 or more, paid 51 percent of total U.S. income taxes.
People making $75,001, a group that includes many households in which both spouses work, may object that they don't feel particularly rich. They should talk to a single mom who's mopping floors. But let's work our way up the income scale:
The top 3 percent of filers, those making $100,000-plus, paid 40 percent of the taxes.
The top four-fifths of 1 percent of filers, who make $200,000 or more, paid 26 percent of the taxes.
The top one-twentieth of 1 percent of filers, those making $1 million or more--and Tom Wolfe's little demonstration in Bonfire of the Vanities notwithstanding, nobody's going to tell me those guys aren't rich--paid 10 percent of the taxes. That's a mere 67,000 households, who on average paid income tax of $707,000 apiece.
OK, but what about Marilyn's second point, namely that the rich pay big with "virtually no exceptions"? In their entertaining 1994 book, America: Who Really Pays the Taxes?, investigative reporters Donald Barlett and James Steele note that the number of filers reporting incomes of $200,000-plus who paid no tax, presumably through outrageous but legal tax dodges, has risen steadily, from 155 in 1966 to 1,081 in 1989, despite numerous attempts to plug the loopholes. That sounds pretty bad, but let's put it in perspective: the number of people making $200,000-plus shot up dramatically during the same time, from 13,000 in 1966 to 787,000 in 1989. The proportion of rich tax dodgers has dwindled from 1 percent of the $200,000-plus class to one-tenth of 1 percent in recent years.
The purpose of this exercise is not to make you feel sorry for the poor rich people. Quite the contrary. Barlett and Steele make the point that most efforts at tax "reform" are really efforts to reduce the tax burden on the wealthy. The most blatant recent example of this was the tax act of 1986. Between 1986 and 1987 the effective tax rate on millionaires fell from 40 percent to 29 percent, and as a result they paid $3.6 billion less in tax. Meanwhile people making from $50,000 to $75,000, a reasonably prosperous but hardly rich crowd, paid $7.6 billion more. Some reform.
The flat-tax scam is more of the same. Nobody's sure what the actual flat-tax rate would be, but let's suppose it was 20 percent. Based on the 1992 returns, if this inane proposal passes taxes on everybody making $200,000-plus will go down and those on everybody else will go up. Malcolm Forbes Jr., one of the richest men in America, is the leading backer of the flat tax. Now do you see why?
Is there something you need to get straight? Cecil Adams can deliver the Straight Dope on any topic. Write Cecil Adams at the Chicago Reader, 11 E. Illinois, Chicago 60611, or E-mail him at email@example.com.
Art accompanying story in printed newspaper (not available in this archive): illustration/Slug Signorino.