Do "The Rich" Pay Their Fair Share of Taxes?

Oct 14, 2008

First of all, if you think I’m actually going to offer an opinion on this subject, you’re crazy. Oh, no, no, no. We’re here to help you form your own opinion. You can do this in Four Easy Steps, by finding out:

  1. Who is “rich”? How many households meet your criterion, whatever it is? You might focus on a specific dollar amount – like $250,000 in household income – or a percentile – like the top 5% – or you can just look at the entire distribution. 
  2. Just how rich are “the rich”? How much of U.S. household income goes to whomever you decided was “the rich”?
  3. How much income tax do “the rich” pay? Repeat step (2), but this time for income taxes paid.
  4. How does (2) compare to (3)?

Step (4) is critical. For example, let’s pretend it turns out the top 5% of households have 50% of the income, and they pay 90% of the household income taxes. Does that sound like too much? Too little? About right? These are not easy questions to answer, because the answers are a matter of opinion. But they are at the heart of the issue.

As you go through the Four Easy Steps, here are some additional thoughts/suggestions:
  • All of the information you’ll need is publicly available
  • Rather than doing (A) by yourself, demand the information from the political candidate(s) or party you support – don’t ask the other guy.  That’s less work for you, and you’ll learn whether the people you support know what they’re talking about. 
  • Where it makes sense, use percentages instead of raw numbers.  One million households might seem like a lot, but it’s less than 1% of U.S. households. 
  • Write down the results you expect, before you take each of the “Four Easy Stepstm.”  This will help you stay objective, because. . .
  • Math is not always intuitive.  Don’t be surprised if you’re surprised by what you learn. 
  • If you can, try to collect the same information for times in the past.  This will help you conclude whether things are getting better or worse.  
Now, be a good American citizen and get to work!

“Painting with Numbers” is my effort to get people talking about financial statements and other numbers in ways that we can all understand. I welcome your interest and your feedback.

Purchase your copy of painting with numbers today