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No representation without taxation

Amity Shlaes

TEXT OF COMMENTARY

Kai Ryssdal: Those famed secret Swiss bank accounts are going to be getting a little less secret. The Swiss finance minister said today he's going to loosen up secrecy laws to keep Switzerland off a European black list of tax havens.

Back here at home it's not tax havens so much that politicians are worried about, it's tax increases. President Obama's going to have to deal with criticism from both sides of the aisle in Congress as he works out his budget plan for next year. Commentator Amity Shlaes says the discussion can't forget the lower ends of the tax charts.


Amity Shlaes: Taxation without representation. That's what our nation's founders rebelled against. Subjects in the colonies were sending money home to the crown without getting say in their own government. The course of U.S. history can be seen as progress by those who are taxed to get representation. Think of women with the 19th Amendment.

Along the way we began to pay out money to groups that paid no income tax at all. There's Medicare, of course, for senior citizens, even if they never worked; welfare for the poor and struggling, at least through the 90s. And, more recently, there's the earned income tax credit, a break for low income workers. The credit was designed to make people want to work and to offset their heavy pension payments for Social Security. The result of expanding it, however, is that many people who work don't pay income tax. Instead, they get money back.

Do we want to help weaker citizens, especially in downturns? Totally. In fact, both parties have plans that relieve yet more taxpayers of their burden. Republicans like payroll tax holidays. And the Obama administration is zeroing out the income tax obligations of yet more citizens.

But a tipping point does come when too many are paying out and too few are paying in. Maybe that tipping point is now. Today, households in the bottom half of earners pay only 4 percent of the income taxes. One tiny group, the top 1 percent, pays close to 40 percent.

This can slow the economic recovery we're waiting for. Top earners won't want to keep producing if their burden gets much heavier. But the more important problem is a problem of civics. All presidents talk about the need for community. We strengthen that sense of community when everyone has to pay some taxes. Like jury duty, paying taxes reminds you that you are part of something; it reminds you of what you owe, not just what's owed to you.

The mood of the skeptics today is just the reverse of the mood at the Boston Tea Party. Then, we said no taxation without representation. Today, try flipping that line: No representation without taxation.

Kai Ryssdal: Amity Shlaes is a senior fellow at the Council on Foreign Relations.

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As far as the "top 1%" go, here are the facts:

"The top 1% of taxpayers (AGI over $364,657) earned approximately 21.2% of the nation's income (as defined by AGI), yet paid 39.4% of all federal income taxes. That means the top 1% of tax returns paid about the same amount of federal individual income taxes as the bottom 95% of tax returns." So much for the left's 'fair share' argument.

As for "What is the percentage of wealth that top 1% have?" We have an *income* tax, not a wealth tax. Oh, wait, yes we do: the death tax!

Several commenters blast Shlaes for neglecting to include "taxes on food, gasoline, telephone, etc. etc." But that argument is disingenuous. Those taxes are regressive, not progressive. The tax *rate* on food doesn't increase when you buy more, whereas the income tax *rate* punishes you more progressively for being more productive.
There's a difference!

Several commenters blast Shlaes for neglecting to include "taxes on food, gasoline, telephone, etc. etc." But that argument is disingenuous. Those taxes are regressive, not progressive. The tax *rate* on food doesn't increase when you buy more, whereas the income tax *rate* punishes you more progressively for being more productive.
There's a difference!

Great plan! I'm confident workers everywhere are turning down promotions and raises so they can cash in once a year on the EIC. I'm surprised CEOs aren't requesting to be paid minimum wage so they can get in on the scam. I know I'm going to!

Concerning the taxation without representation comment.... Most of us are paying our taxes, I won't argue about whether too much or too little, but we are contributing a significant amount. So, are the average wage earners really getting their money's worth of representation? Just from the stories on I hear on Marketplace, one has to have serious doubts. Maybe it's time for a new "Tea Party"?

Somehow, CEO's in the 70's and 80's managed to create wealth for their companies and the country while only earning 30x - 100x the average worker vs today where they earn 300x - 500x the average worker.

If the top 1% is upset about paying nearly 40% of the income taxes and feel it's unfair, perhaps they should reduce how much they make and raise the pay of those under them. It's a win win because then they will pay less taxes and those below will pay more taxes thus creating a more "fair" system.

Ms. Shlaes,

You piece is clever but misleading.

Next time, please include all of the other taxes that the middle and low wage earners must pay like taxes on food, gasoline, telephone, etc. etc.

These taxes take a much bigger bite out of their incomes than the high end earners.

They also rarely benefit from a very low taxes on capital gains.

You mention FICA, but then don't include it when talking about taxes paid by different income groups.

Also, you mention "One tiny group, the top 1 percent, pays close to 40 percent." Could you please tell us next time what amount of income these people are making? How does that compare to 20 or 50 years ago?

Today's Earned Income Credit is a diluted version of negative income tax, some forms of which were proposed by no lesser conservative icons than Milton Friedman and Richard Nixon as alternatives to welfare. About 15% of taxpayers are claiming it.

In response to Brian W, I want to point out that the top 20% of households receive about 50% of all income. They should be paying at lease 75% of the taxes.

This "commentary" is further proof that conservatism is simply a rationale for greed. It has taken 30 years for many of the working class to realize that the ideas of the Republicans and right wingers like Shlaes have resulted in an actual decline in their real income, and finally now, a terrible crisis threatening even the marginal two-earner income that most families require now. NPR and marketplace should be ashamed of adding the the list of irresponsible media outlets that give her noxious views prominence.

NotA RandianCultist
Your comments are interesting, but very limited. In a closed economic system, you would be correct that changes in the tax rate would not have much impact on high-income individuals (other than to look for better ways to shelter the income). However, we don't have a closed system, and those with high incomes have the greatest ability to adjust to changes in the tax system. (You may be too young to remember, but one example was the Swede Bjorn Borg, a tennis star of the 70's and 80's who moved to Monaco to avoid 90% tax rates in Sweden).

This occurs even more with corporations. Have you noticed that most new technology companies are moving away from California to states with more favorable tax climates (Colorado and North Carolina, to name a few). The US has one of the highest corporate tax rates in the world; do you really think that if we increase corporate or personal taxes further, this will not impact corporate and personal behavior?

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